Application of the M-Score Model to Test the Reliability of Financial Statements at Companies Listed on the Vietnamese Stock Market

Abstract

The reliability of financial statements is important to many people such as investors, corporate shareholders, and auditors. A reliable financial report is free from problems of fraud and manipulation by corporate management. Using the methodology and meta-analysis, the research team found that the application of the M-score model in Vietnam is not yet popular. The number of research papers on the M-score model is small and there is no research using this model to assess the reliability of financial statements. Research results with actual data from the unaudited financial statements of a typical enterprise show that the application of the M-score model to assess the reliability or detect fraud of financial statements is an appropriate fit. However, the research team also found that the M-score model also has a high probability of incorrect identification of unreliable financial statements. Therefore, from the research results, we recommend that investors, shareholders, and stakeholders use a combination of the M-score model together with other technical analysis tools to be able to identify whether a financial statement is reliable.