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Flavia C. Rodrigues da Cunha and Mauricio S. Bugarin
''Benford's law for audit of public works: an analysis of overpricing in Maracanã soccer arena's renovation''
( 2015, Vol. 35 No.2 )
Auditing of public works is a time consuming task because budget worksheets are often long and difficult to analyze. The present work illustrates the application of Newcomb-Benford Law (NB Law) to detecting overpricing in worksheets of public works. That law suggests that the frequency of the first digit in a multitude of non-manipulated numerical databases is decreasing from digit 1 to digit 9. The paper describes the relevant statistical tests of NB Law and applies these tests to the work of Brazil's Maracanã Soccer arena renovation for the 2014 FIFA World Cup. Next, it compares NB Law's results with those obtained with the analysis of prices conducted by the Brazilian Court of Accounts (TCU). The tests identified 17 items in the worksheet that did not comply with the Law and corresponded to 71.54% of the total overpricing uncovered by TCU.
Keywords: Audit. Public works. Newcomb-Benford's law. Overpricing.
JEL: C1 - Econometric and Statistical Methods: General
H8 - Public Economics: Miscellaneous Issues: General
Manuscript Received : Aug 14 2014 Manuscript Accepted : May 14 2015

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