Detection of earnings management by Indian firms

Abstract

The analysis of financial statements to detect possible fraud is fraught with complications. Not only are there different degrees of earnings manipulations, differences in reporting culture/standards across geographies makes analysis difficult. One model that tries to incorporate accounting ratios to track possible manipulation is the Beneish model, which Messod D. Beneish proposed in 1999. This treatise deals with the application of Beneish model in the Indian context, identifies characteristics of firms with high Beneish scores and recommends tweaks to the model for Indian companies.