Abstract:

The main research aim was to examine the extent to which companies manipulate their financial statements. The analysed database contains the financial statements of the Hungarian-Romanian border counties (Satu Mare, Bihar, Arad, Timiş, Szabolcs-Szatmár-Bereg, Hajdú-Bihar, Békés, Csongrád-Csanád) from 2014 to 2019. The database contains companies with at least 100,000 euros in total sales and total assets in the average of the analysed years. Considering the average of the six years examined, the database corresponding to the criteria above contained 2,331 Hungarian and 2,437 Romanian companies. The five-variable Beneish M-score model was used to investigate the likely manipulation of financial statements. The following decision criteria were used for the M-score values of the Beneish model: if the M-score is less than -2.22, manipulation is unlikely; if the M-score is between -2.22 and -1.78, manipulation is possible; if the M-score is greater than -1.78, manipulation is likely. Therefore, 26.01% of the companies in the Hungarian border counties likely manipulate their financial statements, which is 24.58% for Romanian border companies. On the other hand, 66.39% of the companies in the Hungarian counties likely do not manipulate their accounting reports, while this ratio is 67.52% in the Romanian ones. The difference is caused by the so-called "grey zone" (manipulation is possible). Therefore, it can be concluded that the companies of the Romanian border counties likely manipulate their accounting reports less, but a statistical test does not support this. The average Beneish M-score of the companies in both regions is small negative values in each examined year (Hungarian side: -0.83; Romanian side: -0.90), which exceeds the value of -1.78, falling into the possibly manipulated range. Finally, it can be stated that no significant difference can be shown between the companies of the two examined regions regarding the manipulation of the accounting reports.