Faculty of Administrative Sciences and Economics, Accounting Department organized a workshop on “Financial Fraud Detection in Organizations-Testing Through Different Models” The workshop was conducted by Dr Krishna Navulur, lecturer of Business and Management.
In this presentation, Dr Krishna Navulur explained the importance of fraud in financial statements, which crossed the threshold of the Beneish M Score model, and confirm that the amounts were manipulated.
Fraud in financial statements is a major concern for many organizations, auditors and the government. The research paper aims to identify the effectiveness of ratio analysis and digital analysis as a procedural way of detecting fraud in financial statements. Beneish’s prohibit model recommended ratio and trend analysis by relating the nexus between the importance of the financial statements to observe manipulation of earnings.
Benford’s Law recommended digital analysis in fraud detection based on the actual frequency of few digits in various positions in the financial data. The researcher analyzed secondary data of Enron Corporation which was listed in Forbes magazine and Satyam Computers Services Limited which was charged as fraudulent by the Securities and Exchange Commission, USA. The researcher applied the quantitative method to analyze published financial statements of fraudulent companies and chose two financial years. The outcomes of the research revealed that both companies crossed the threshold of the Beneish M Score model and confirm that the amounts were manipulated. The study helps the investors, auditors and government to estimate the ease of using the above methods in fraud detection and avoid malpractices during the preparation of financial statements.
