Application of Benford’s law to detect signs of under-invoicing in companies in the restaurant sector during the COVID-19 pandemic

Martins Ana, Alves Jorge () and Vaz Clara
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Martins Ana: Instituto Politécnico de Bragança, Bragança, Portugal
Alves Jorge: Unidade de Investigação Aplicada em Gestão (UNIAG), Instituto Politécnico de Bragança, Bragança, Portugal
Vaz Clara: Centro de Investigação em Digitalização e Robótica Inteligente (CeDRI), Instituto Politécnico de Bragança, Bragança, Portugal

European Journal of Tourism, Hospitality and Recreation, 2024, vol. 14, issue 2, 273-284

Abstract: The main objective of this study is to detect signs of under-invoicing by applying Benford’s law to the Portuguese restaurant sector during the COVID-19 pandemic, in the context of government support policies. Between 2020 and 2021, the State adopted several measures to provide additional support to companies that have seen a significant decrease in their activity, namely, a reduction of at least 25% in turnover. A literature review was carried out focusing on the impact of the COVID-19 pandemic on the companies under analysis, the support measures adopted by the State and, finally, a survey of the theoretical component relating to the application of Benford’s law in accounting. The data were collected from the Iberian Balance Sheet Analysis System database for 2019, 2020, and 2021. After analysing the data, significant deviations are observed in several digits, practically for all the compliance tests, both in the analysis of the first digit test and in the analysis of the first two digits test. The results therefore show signs of under-invoicing in 2020 by the analysed companies, which suffered, on average, a 79% reduction in turnover.

Keywords: COVID-19; Benford’s law; under-invoicing; support; restaurant sector (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ejothr:v:14:y:2024:i:2:p:273-284:n:1008

DOI: 10.2478/ejthr-2024-0020

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