Αn Integrated Financial Ratio Analysis as a Navigation Compass through the Fraudulent Reporting Conundrum: Α Case Study

Eleftherios Kourtis, Georgios Kourtis and Panayiotis Curtis

International Journal of Finance, Insurance and Risk Management, 2019, vol. 9, issue 1-2, 3-20

Abstract: Purpose: An integrated analysis of the consolidated financial statements of the Folli Follie group was performed to explore whether it is an effective apparatus ro reveal misleading reporting. Design/methodology/approach: Horizontal and vertical analysis, cash flows from operations, current accruals quality, profitability ratios, as well as the cash conversion cycle (CCC) and Piotroski models were applied. All of them worked harmoniously in a supplementary fashion to corroborate findings of distorted data reporting. Findings: Financial ratios had been derailed and remained unexplained by the prtinciples of financial management. It is attributed to fraudulent earnings management practices, that altered artificially specific financial data disproportionally. Practical implications: Αn integrated financial ratio analysis contributes to preventing or ameliorating the non-efficient allocation of resources associated with deplorable creative accounting practices, that creates welfare loses to the detriment of shareholders, stakeholders and ultimately to society as a whole. Originality/value: The analysis outcomes can be exploited as a red flags / whistle-blowing mechanism in cases of financial statement manipulation, since under these circumstances crucial financial ratios seem to derail. A holistic financial statement analysis is proven to represent a vital roadmap and an effective apparatus in forensic accounting, to secure that unfounded financial reporting based on spurious data will not easily get away unnoticed.

Keywords: Fraudulent Reporting; Earnings Management; Financial Statements Analysis; Ratios; CFFO; CCC; Du Pont Analysis. (search for similar items in EconPapers)
JEL-codes: G11 G14 G32 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ers:ijfirm:v:9:y:2019:i:1-2:p:3-20

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