Certified Fraud Examiner Practice Exam 2025 – All-in-One Guide to Master Your Certification!

Benford's Law predicts the relative incidence of first digits in naturally occurring sets of numerical data. Specifically, it states that in many datasets, the first digit is more likely to be a small number. For instance, the number 1 appears as the leading digit about 30% of the time, while larger numbers like 9 occur as the leading digit less frequently, around 5% of the time. This phenomenon tends to hold true across diverse datasets, including financial records, population statistics, and physical constants.

Understanding this principle is crucial for fraud examination and forensic accounting, as deviations from the expected distribution indicated by Benford's Law can signal potential manipulation or irregularities in financial data. In contrast, the other options do not accurately reflect the law’s focus. For instance, it does not concern the frequency of letters in legal documents, the likelihood of specific legal outcomes, or the frequency of fraudulent activities, which may involve factors beyond just the distribution of first digits. Thus, recognizing Benford's Law's application to the distribution of leading digits is essential for identifying anomalies in various numerical datasets.