Benford's Law and Tax Fraud

Benford’s law can uncover fictitious numbers in random data sets because data manipulated for tax evasion purposes will likely deviate from Benford’s law, and in that case it is supposed that there had been a tax fraud act.

The difference between the expected and observed frequencies is determined through use of a chi-square test. A chi-square statistic measures how a model of expectations compares with actual observed data.