Digit, Probability

1, 0.301

2, 0.176

3, 0.125

4, 0.097

5, 0.079

6, 0.067

7, 0.058

8, 0.051

9, 0.046

__Fradulent Checks__Digit, Frequency

1, 36

2, 32

3, 45

4, 20

5, 24

6, 36

7, 15

8, 16

9, 7

Complete parts (a) and (b).

(a) Using the level of significance α = 0.05, test whether the first digits in the allegedly fraudulent checks obey Benford's Law. Do the first digits obey the Benford's Law?<br />

Yes or No

Based on the results of part (a), could one think that the employe is guilty of embezzlement?

Yes or No

Show frequency percentages

Digit Fraud Probability Benford Probability

1 0.156 0.301

2 0.139 0.176

3 0.195 0.125

4 0.087 0.097

5 0.104 0.079

6 0.156 0.067

7 0.065 0.058

8 0.069 0.051

9 0.03 0.046

Take the difference between the 2 values, divide it by the Benford's Value. Sum up the squares to get the Test Stat of 2.725281277

Critical Value Excel: =CHIINV(0.95,8) = 2.733

Since test stat is less than critical value, we cannot reject, so

**YES**, it does obey Benford's Law and

**NO**, there is not enough evidence to suggest the employee is guilty of embezzlement.