Benford's Law Test Method in Tax Audit Planning

Abstract

The purpose of this research is to test whether the Benford’s Law test method can be used in tax audit planning. This research uses data on tax invoices of periodic VAT Tax Return registered in local tax office. The research was carried out by going through the identification and extraction stages of the first and second digits. The results show that Benford's Law can be used as an alternative method to indicate an improper periodic tax invoice. In addition, Benford's Law can also provide an assessment of which sectors and areas have indications of improper periodic tax invoice compared to other sectors and areas. Indications from this assessment can be used as a focus in planning tax invoice audit.