Detecting Corporate Financial Fraud using Beneish M-Score Model

Abstract

Detecting financial fraud is an important issue and ignoring this issue may cause financial and non-financial losses to individuals and organizations. The aim of this study is to test the ability of Beneish M-Score Model for detecting financial fraud among companies listed on Tehran stock exchange. The research sample consists of 137 companies listed on Tehran Stock Exchange for a period of 11 years (2005-2015). Logistic regression analysis is used to test the research hypothesis at the level of 5% error. The results show that the accuracy of Beneish M-score model for detecting fraudulent financial reporting is 66/03 percent. In general, based on the logistic regression analysis, despite the existence of valid theoretical foundations, it seems that it is not possible to detect financial fraud of companies listed on Tehran stock exchange using Beneish M-score model. In other words, based on financial information of companies listed on Tehran Stock Exchange, Beniesh model is not a suitable model for detecting fraud and we need to develop a new model to detect fraud in financial reports