<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The Beneish model is a useful tool for assessing the potentially fraudulent behaviour of an entity that could resort to misstated financial reporting by manipulating earnings. Tarjo ---amp--- Herawati (2015) concluded that “the M-score of the Beneish model was generally able to detect financial fraud”, following a study on 35 listed companies that were confronted with allegations of fraud in the period 2001-2014, by accessing the sanctions database applied to companies of public interest (issuers) published by the Financial Supervisory Authority. Also, <xref ref-type="bibr" rid="j_amso-2019-0005_ref_001_w2aab3b8c10b1b7b1ab1ab1Aa">Ahmet Ozcan (2018)</xref> stated that the Beneish model “brings effective value in the analysis of the quantitative characteristics of falsified financial statements”, a conclusion based on a concentrated research on a sample of 174 firms over the period 2005-2017. However, the construction of this model was not oriented for the financial services industry, therefore the studies referred to above do not include any investment firms. Our research aims to assess the relevance of the use of the Beneish model to entities involved in scandals on fraudulent or suspected distorted financial reporting operations (Romcab, 2017 and Harinvest, 2013) in order to Test the Beneish model’s validation capability. On the basis of the conclusions obtained, it can be accepted that the applicability of the model is validated for the entities examined.</p></abstract>

The Beneish model is a useful tool for assessing the potentially fraudulent behaviour of an entity that could resort to misstated financial reporting by manipulating earnings. Tarjo ---amp--- Herawati (2015) concluded that “the M-score of the Beneish model was generally able to detect financial fraud”, following a study on 35 listed companies that were confronted with allegations of fraud in the period 2001-2014, by accessing the sanctions database applied to companies of public interest (issuers) published by the Financial Supervisory Authority. Also, Ahmet Ozcan (2018) stated that the Beneish model “brings effective value in the analysis of the quantitative characteristics of falsified financial statements”, a conclusion based on a concentrated research on a sample of 174 firms over the period 2005-2017. However, the construction of this model was not oriented for the financial services industry, therefore the studies referred to above do not include any investment firms. Our research aims to assess the relevance of the use of the Beneish model to entities involved in scandals on fraudulent or suspected distorted financial reporting operations (Romcab, 2017 and Harinvest, 2013) in order to Test the Beneish model’s validation capability. On the basis of the conclusions obtained, it can be accepted that the applicability of the model is validated for the entities examined.

Testing the Beneish Model Relevance in Case of Entities with Confirmed Reputational Risk

Faculty of Economics and Law, ED1 Department – Economic Sciences

University of Medicine, Pharmacy, Sciences and Technology “George Emil Palade” from Targu Mures

Acta Marisiensis. Seria Oeconomica

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The Beneish model is a useful tool for assessing the potentially fraudulent behaviour of an entity that could resort to misstated financial reporting by...

Testing the Beneish Model Relevance in Case of Entities with Confirmed Reputational Risk

Published Online: Feb 07, 2020

Page range: 43 - 48

DOI: https://doi.org/10.2478/amso-2019-0005

Keywords
earnings management, investment firm, Beneish m-Score, fraudulent reporting, reputational risk

© 2019 Ioan-Ovidiu Spătăcean, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Testing the Beneish Model Relevance in Case of Entities with Confirmed Reputational Risk

Published Online: Feb 07, 2020

Page range: 43 - 48

DOI: https://doi.org/10.2478/amso-2019-0005

Keywordsearnings management, investment firm, Beneish m-Score, fraudulent reporting, reputational risk

© 2019 Ioan-Ovidiu Spătăcean, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
earnings management, investment firm, Beneish m-Score, fraudulent reporting, reputational risk