ASSESSMENT OF FINANCIAL STATEMENT MANIPULATION AND INSOLVENCY RISK IN A PHARMACEUTICAL COMPANY THROUGH THE COMBINED APPLICATION OF THE BENEISH MSCORE AND ALTMAN Z-SCORE
DOI:
https://doi.org/10.69980/rxx4mv92Keywords:
Financial statement fraud, Earnings manipulation, Beneish M-Score, Altman Z-Score, Forensic accountingAbstract
Forensic accountants, auditors, and regulatory bodies have been under increasing pressure to identify potential misreporting of a company's financials prior to the damage being done to investors and the capital markets. This research project applied two quantitative screening methods, the Beneish MScore and the Altman Z-Score to Zydus Lifesciences Ltd.'s (a leading Indian Pharmaceutical Company) publicly available financial statements for nine fiscal years; FY 2016 through FY 2024. The Beneish M-Score is an eight-ratio model designed to identify statistical patterns of earnings manipulation. The Altman Z-Score is a five-financial dimension model that provides a single bankruptcy-prediction score. Together the two screening models form a dual lens approach; the first lens is focused on the quality of a company's accounting records while the second lens is focused on the company's solvency risk. Each of these screening methods provides a quantifiable measurement system to evaluate and measure the degree of risk associated with a company's earnings and accounting practices. Additionally, the use of these screening methods may help to support fraud detection initiatives as well as the assessment of a company's risk profile. The use of these screening methods also supports enhanced corporate governance through the use of analytical tools that companies may utilize to prevent or intervene in fraud schemes prior to their occurrence.
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