APPLICATION OF FIRST DIGITS ‘BENFORD’ LAW TO DETECT FRAUD IN THE FINANCIAL STATEMENT OF LISTED OIL AND GAS COMPANIES IN NIGERIA

The applicability of Benford’s Law to detect fraud in accounting data is very essential considering the increasing rate of fraud committed in organizations today. The objective of this study is to apply Benford’s First Digit Distribution Law to detect fraud in the financial statement of oil and gas companies listed on the Nigerian Stock Exchange under the energy sector. Two hypothesis were constructed to determine the conformity of sales data and payable data to Benford’s First Digit Distribution Law. The study employed first digit equation to determine the differences between sales data and payable data and Benford’s first digit distribution law. The study employed chi-square test to determine the significance of deviation of sales data and payable data from the proposed Benford’s first digit distribution law.  The findings of the study show that sales data and payable data deviated from the proposed Benford’s Law. Similarly, the result from the chi-square test show that sales conforms to the expected Benford’s first digit distribution law while the payables data does not comply to the expected Benford’s first digit distribution Law. The study concludes that while there is no fraud committed in the sales data, there is fraud in the payables data of oil and gas companies listed on the Nigerian Stock Exchange under the energy sector.  The study recommends among others that the application of Benford’s law to detect fraud in accounting data is very essential as it assist in mitigating fraud.