Financial Statement Fraud Detection
Proxy: Beneish M-Score
Definition & Description
The Beneish M-Score is a probability model based on accounting data that uses 8 financial ratios to identify whether a company has manipulated its earnings. It was created by Professor Messod Beneish in 1999.
How to Use (Panel Data)
Widely used in forensic auditing and fraud auditing research to distinguish between manipulator and non-manipulator companies.
Full Explanation Article
An M-Score greater than -2.22 (e.g., -1.5) indicates a high probability of earnings manipulation.
The eight main components include: Days Sales in Receivables Index (DSRI), Gross Margin Index (GMI), Asset Quality Index (AQI), Sales Growth Index (SGI), Depreciation Index (DEPI), SGA Expenses Index (SGAI), Leverage Index (LVGI), and Total Accruals to Total Assets (TATA).
Related Reference Journals
- [1]Beneish, M. D. (1999). The Detection of Earnings Manipulation.
Research Ideas
Detecting financial statement fraud using the Beneish M-Score in property companies.
Comparative analysis of the accuracy of Altman Z-Score vs. Beneish M-Score preceding bankruptcy.
Frequently Asked Questions (FAQ)
What is the difference between this proxy and regular accounting variables?
For detailed information about this proxy, please refer to the article above. NgepetData can automatically extract the required data from your PDF Annual Report.
Where does the data come from to calculate this proxy?
For detailed information about this proxy, please refer to the article above. NgepetData can automatically extract the required data from your PDF Annual Report.
Can this proxy be used for all industry sectors?
For detailed information about this proxy, please refer to the article above. NgepetData can automatically extract the required data from your PDF Annual Report.
What M-Score threshold indicates manipulation?
For detailed information about this proxy, please refer to the article above. NgepetData can automatically extract the required data from your PDF Annual Report.