Abstract:

Right from the start of the accounting profession, there have been pressures from owners and management to “beautify” information about the performance and state of their business in the financial statements. It was only a matter of time before management or employees began to abuse their undeniably advantageous position, which they have in all respects before users of financial statements, such as investors, the state, customers, competitors and other stakeholders. This advantage allows entities to make their results more attractive by using information superiority, while the reality may be quite different. There are some basic reasons for company financial statement manipulation, e.g. increase the reported earnings or reduce the reported loss, manipulate with indicators used in financial analysis, conceal financial risk or strengthen the company´s access to finance. The reason for using these practices by the company management can be just a simple delay in solving the situation, trying to keep the company position as long as possible or the reasons are more complex and sophisticated. There are many model to predict the adjusting financial statements. In this paper we focus on Beneish M-score model, which is one of the company fraud detection technique. M-score is a numerical expression of possible manipulation of accountants, especially manipulation of the impact on the performance (profitability) of the company. The advantage of this model is that it suffices with input data from financial statements, making it suitable for any user.