Analysing Earnings Manipulation in Pharmaceutical Company Using the Beneish M-Score and Modified C-Score: A Dual-Model Approach

Abstract

Forensic accountants, auditors and other regulatory bodies need to be able to identify fraud risk in a company's reported financial situation as well as assess the possible effects of such fraudulent activity. This is accomplished through the application of numerous statistical models that will help determine whether fraud has taken place. Different techniques have been created to do so (including both the modified C-Score as well as the Benish M-Score)

. Both scoring systems provide a quantifiable method for identifying and evaluating the level of risk related to an entity's earnings and accounting practices. In addition, these scoring systems assist fraud detection efforts, support the assessment of an entity's risk profile, and enhance corporate governance through the provision of analytical tools that can be used to prevent or intervene in fraud schemes before they occur. These models also contribute to financial transparency and accountability, protect investors from fraud, and preserve the integrity of capital markets.