A Statistical Model of Fraud Risk in Financial Statements. Case for Romania Companies

Andrada-Ioana Sabău (Popa), Codruța Mare and Ioana Lavinia Safta
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Andrada-Ioana Sabău (Popa): Faculty of Economics and Business Administration, Cluj-Napoca University Babes-Bolyai, 400591 Cluj-Napoca, Romania
Codruța Mare: Faculty of Economics and Business Management, Cluj-Napoca University Babes-Bolyai, 400591 Cluj-Napoca, Romania
Ioana Lavinia Safta: Faculty of Economics and Business Management, Cluj-Napoca University Babes-Bolyai, 400591 Cluj-Napoca, Romania

Risks, 2021, vol. 9, issue 6, 1-15

Abstract: Tax avoidance is one of the most frequent reasons for which companies tend to resort to creative accounting techniques. The purpose of the study is to identify which of the eight-variables from the Beneish influences the most or least the outcome of the final score, as a percent, by developing a statistical model. The sample was selected from the Bucharest Stock Exchange and consists of 66 companies traded on the main market, for the years 2015–2019. The results show that from the total of the eight variables, GMI (Gross Margin Index), AQI (Asset Quality Index), DEPI (Depreciation Index) and TATA (Total Accruals to Total Assets) are significantly influencing the probability to commit fraud. The developed model is validated with only 10% of the non-fraud companies being mistakenly considered as fraud based on our model and vice versa.

Keywords: Beneish model; fraud; statistical model; Mann-Whitney test (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:9:y:2021:i:6:p:116-:d:572590

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