Testing for Benford’s Law as a Response to the Risks of Material Misstatement Due to Fraud

The paper assesses the possibility of applying Benford’s Law tests as a response to the risks of material misstatement due to fraud under International Standard on Auditing (ISA) 240. The approach has been applied as part of a comprehensive financial statement audit of a leasing company. Its approbation made it possible to identify fraudulent transactions in accounting resulting from management override of controls, while substantially reducing the labor costs of the audit. The confirmation of Benford’s Law efficacy in the auditing process solidifies its status as a reliable and valuable tool for detecting potential fraud and uncovering material misstatements, ultimately enhancing the overall integrity and trustworthiness of financial audits.