Detecting financial statement fraud by Malaysian public listed companies: the reliability of the Beneish M-Score Model

Various fraud prediction tools have been developed to detect financial statement fraud triggered by earnings manipulation. Among them is the Beneish M-Score model as a financial forensic tool to gauge potential earnings manipulation in firms’ financial statements. The model was found to be effecti...

Full description

Bibliographic Details
Main Authors:	Mohamad Ezrien Mohamad Kamal, Mohd Fairuz Md Salleh, Azlina Ahmad
Format:	Article
Language:	English
Published:	Penerbit Universiti Kebangsaan Malaysia 2016
Online Access:	http://journalarticle.ukm.my/10793/ http://journalarticle.ukm.my/10793/ http://journalarticle.ukm.my/10793/1/8601-43000-1-PB.pdf

id	ukm-10793
recordtype	eprints
spelling	ukm-107932017-10-10T12:44:57Z http://journalarticle.ukm.my/10793/ Detecting financial statement fraud by Malaysian public listed companies: the reliability of the Beneish M-Score Model Mohamad Ezrien Mohamad Kamal, Mohd Fairuz Md Salleh, Azlina Ahmad, Various fraud prediction tools have been developed to detect financial statement fraud triggered by earnings manipulation. Among them is the Beneish M-Score model as a financial forensic tool to gauge potential earnings manipulation in firms’ financial statements. The model was found to be effective in detecting 76% of earnings manipulating firms subjected to accounting enforcement actions by the United States Securities and Exchange Commission (U.S. SEC). Furthermore, the earnings manipulation model was also successful in discovering 71% of the most prominent fraudulent financial reporting scandals in the United States prior to public announcement. The current study assesses the reliability of the Beneish M-Score model in detecting earnings manipulation and financial statement fraud committed by Malaysian public listed companies prior to public announcement. The research sample consists of 17 public listed companies of which their directors and top management have been charged and prosecuted by the Securities Commission Malaysia (SC) for committing fraudulent reporting and misstatement from 1996 until 2014. The results show that the Beneish M-score model is reliable in detecting earnings manipulation and financial statement fraud by 82% in 14 out of 17 listed companies charged for fraudulent financial reporting. The findings provide support for the application of the Beneish M-Score model by the management of the company to check for any irregularities in firms’ financial report so that adjustment can be made before submission to Bursa Malaysia to prevent from any potential backlash that could damage firm reputation. The model application is likewise beneficial to prospective and existing shareholders to assist their investment decision making in reducing risk of losses due to fraud. In addition, the findings suggest that the model can be applied by researchers, auditors, and enforcement agencies as an effective detection tool to signal potentially fraudulent reporting companies in Bursa Malaysia for further investigation and enforcement action. Penerbit Universiti Kebangsaan Malaysia 2016 Article PeerReviewed application/pdf en http://journalarticle.ukm.my/10793/1/8601-43000-1-PB.pdf Mohamad Ezrien Mohamad Kamal, and Mohd Fairuz Md Salleh, and Azlina Ahmad, (2016) Detecting financial statement fraud by Malaysian public listed companies: the reliability of the Beneish M-Score Model. Jurnal Pengurusan, 46 . pp. 23-32. ISSN 0127-2713 http://ejournal.ukm.my/pengurusan/issue/view/805
repository_type	Digital Repository
institution_category	Local University
institution	Universiti Kebangasaan Malaysia
building	UKM Institutional Repository
collection	Online Access
language	English
description	Various fraud prediction tools have been developed to detect financial statement fraud triggered by earnings manipulation. Among them is the Beneish M-Score model as a financial forensic tool to gauge potential earnings manipulation in firms’ financial statements. The model was found to be effective in detecting 76% of earnings manipulating firms subjected to accounting enforcement actions by the United States Securities and Exchange Commission (U.S. SEC). Furthermore, the earnings manipulation model was also successful in discovering 71% of the most prominent fraudulent financial reporting scandals in the United States prior to public announcement. The current study assesses the reliability of the Beneish M-Score model in detecting earnings manipulation and financial statement fraud committed by Malaysian public listed companies prior to public announcement. The research sample consists of 17 public listed companies of which their directors and top management have been charged and prosecuted by the Securities Commission Malaysia (SC) for committing fraudulent reporting and misstatement from 1996 until 2014. The results show that the Beneish M-score model is reliable in detecting earnings manipulation and financial statement fraud by 82% in 14 out of 17 listed companies charged for fraudulent financial reporting. The findings provide support for the application of the Beneish M-Score model by the management of the company to check for any irregularities in firms’ financial report so that adjustment can be made before submission to Bursa Malaysia to prevent from any potential backlash that could damage firm reputation. The model application is likewise beneficial to prospective and existing shareholders to assist their investment decision making in reducing risk of losses due to fraud. In addition, the findings suggest that the model can be applied by researchers, auditors, and enforcement agencies as an effective detection tool to signal potentially fraudulent reporting companies in Bursa Malaysia for further investigation and enforcement action.
format	Article
author	Mohamad Ezrien Mohamad Kamal, Mohd Fairuz Md Salleh, Azlina Ahmad,
spellingShingle	Mohamad Ezrien Mohamad Kamal, Mohd Fairuz Md Salleh, Azlina Ahmad, Detecting financial statement fraud by Malaysian public listed companies: the reliability of the Beneish M-Score Model
author_facet	Mohamad Ezrien Mohamad Kamal, Mohd Fairuz Md Salleh, Azlina Ahmad,
author_sort	Mohamad Ezrien Mohamad Kamal,
title	Detecting financial statement fraud by Malaysian public listed companies: the reliability of the Beneish M-Score Model
title_short	Detecting financial statement fraud by Malaysian public listed companies: the reliability of the Beneish M-Score Model
title_full	Detecting financial statement fraud by Malaysian public listed companies: the reliability of the Beneish M-Score Model
title_fullStr	Detecting financial statement fraud by Malaysian public listed companies: the reliability of the Beneish M-Score Model
title_full_unstemmed	Detecting financial statement fraud by Malaysian public listed companies: the reliability of the Beneish M-Score Model
title_sort	detecting financial statement fraud by malaysian public listed companies: the reliability of the beneish m-score model
publisher	Penerbit Universiti Kebangsaan Malaysia
publishDate	2016
url	http://journalarticle.ukm.my/10793/ http://journalarticle.ukm.my/10793/ http://journalarticle.ukm.my/10793/1/8601-43000-1-PB.pdf
first_indexed	2023-09-18T19:58:27Z
last_indexed	2023-09-18T19:58:27Z
_version_	1777406687224791040

Detecting financial statement fraud by Malaysian public listed companies: the reliability of the Beneish M-Score Model

Similar Items