Procedia - Social and Behavioral Sciences · 2015 · 116 citations · 13 references
BusinessAccountancyAccountingAuditingFinancial AccountingFinancial Statement AnalysisFinancial Statement AuditsFinancial Statement FraudFinancial StatementsFraud DetectionFraud ExaminationFraud Risk ManagementFalse Financial StatementsFinancial Statement Fraud DetectionFinancial Statement RatiosLogistic Regression
Financial ratios are widely used to detect fraud, with literature identifying which ratios are most sensitive to managerial motives. The study aims to identify financial ratios whose values signal fraud in statements. The authors analyzed 40 fraudulent and 125 non‑fraudulent financial statement sets to develop the model. A logistic regression model for fraud detection was developed, marking the first empirical study of its kind in Lithuania.
Analysis of financial ratios is one of those simple methods to identify frauds. Theoretical survey revealed that, in scientific literature, financial ratios are analysed in order to designate which ratios of the financial statements are the most sensitive in relation with the motifs of executive managers and employees of companies to commit frauds. Empirical study included the analysis of the following: 1) 40 sets of fraudulent financial statements and 2) 125 sets of non-fraudulent financial statements (unconditional audit report was issued for the sets of financial statements of these companies). The aim of the research is to distinguish financial ratios, the values of which could indicate the fraud in financial statements. Moreover, the logistic regression model of fraud detection in financial statements has been developed. The research is unique for being the first empirical study of its type in Lithuania.
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The Detection of Earnings Manipulation
Messod D. Beneish · Financial Analysts Journal · 1999 · 1.3K citations
Business, Accountancy, Accounting +12