Two-Digit Test
Definition
An extension of Benford's Law to the first two significant digits, producing 90 possible combinations each with a predicted frequency, which is particularly sensitive to round-number preferences and threshold avoidance (numbers just below an approval limit).
- Basis
- Extension of Benford's Law to the first two significant digits
- Possible combinations
- 90
- Sensitivity
- Round-number preferences and threshold avoidance
- Context
- Digital analysis in forensic accounting
Common questions
Why is the two-digit test more sensitive to threshold avoidance than the single first-digit test?+
Threshold avoidance often shows up as a cluster of values just below a specific limit, such as numbers just under an approval cap. Because the two-digit test resolves 90 categories instead of 9, it can detect that narrow clustering that a coarser single-digit comparison would smooth over.
Does a deviation on the two-digit test by itself prove fraud?+
No, a deviation flags a set of transactions as statistically unusual and worth further review, but legitimate business patterns, such as fixed pricing or contractual thresholds, can also produce non-conforming digit distributions.
Related terms
- Benford's Law
- An empirical regularity in naturally occurring numerical datasets: the leading digit follows a logarithmic distribution, with 1 appearing about 30% of the...
- Chi-Square Test
- A goodness-of-fit test comparing the observed digit frequencies in a dataset to the expected Benford frequencies, producing a test statistic that is...
- Mean Absolute Deviation (MAD)
- A practical Benford conformity measure that averages the absolute differences between observed and expected proportions across all leading digits, with Nigrini benchmarks...
- Second-Digit Test
- Analysis of the second significant digit in isolation, where 0 is expected to appear about 11.97% of the time. A spike in...
- Z-Statistic
- A per-digit test that calculates whether the deviation between an observed frequency and the Benford expected frequency for that single digit is...