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The use of Beneish M-scores to reveal creative accounting: evidence from Slovakia

Author

Listed:
  • Pavol Durana

    (University of Zilina, Slovakia)

  • Roman Blazek

    (University of Zilina, Slovakia)

  • Veronika Machova

    (School of Expertness and Valuation; Institute of Technology and Business in Ceske Budejovice, Czechia)

  • Miroslav Krasnan

    (University of Zilina, Slovakia)

Abstract

Research background: In creative accounting, the primary goal of every enterprise is to increase and strengthen its market position. Over the years, manipulation of financial statements has also reached the territory of Central European countries, including the Slovak Republic. Therefore, an analysis was conducted to identify enterprises that handle accounting. This article focuses specifically on Sector A: agriculture, forestry, and fisheries. Purpose of the article: The aim of the article was to reveal the creative accounting practices of a sample of enterprises operating in the Slovak business environment in a sector using the Beneish model. Methods: The Beneish model was used to calculate the manipulation of enterprises’ financial statements. Both variants, that is, the 5-parameter model and 8-parameter model, were used for the calculation. The results of these models were plotted using graphs and receiver operating characteristic (ROC) curves. Findings & value added: Based on the use of both variants of the Beneish model, it was proven that enterprises in the analyzed sector use the possibility of manipulating financial statements. The added value of the article is the detection of the use of creative accounting in a specific sector, which makes the study original in its application and space-time orientation.

Suggested Citation

  • Pavol Durana & Roman Blazek & Veronika Machova & Miroslav Krasnan, 2022. "The use of Beneish M-scores to reveal creative accounting: evidence from Slovakia," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 17(2), pages 481-510, June.
    • Handle: RePEc:pes:ierequ:v:17:y:2022:i:2:p:481-510
    DOI: 10.24136/eq.2022.017
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    1. Maria Kovacova & Lenka Hrosova & Pavol Durana & Jakub Horak, 2022. "Earnings management model for Visegrad Group as an immanent part of creative accounting," Oeconomia Copernicana, Institute of Economic Research, vol. 13(4), pages 1143-1176, December.

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    More about this item

    Keywords

    Beneish model; creative accounting; earnings management; ROC curve;
    All these keywords.

    JEL classification:

    • M00 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General - - - General
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

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