Earnings Quality Assessment of Financial Statments Using the Beneish M-Score Model in Manufacturing Companies Listed on the Indonesia Stock Exchange (BEI)

Abstract

This study aims to analyze and assess the level of manipulation of financial statements and to analyze the quality of earnings of manufacturing companies in terms of relevance based on Beneish M-score. The type of research used is qualitative with a descriptive approach. The object of this research is a manufacturing company listed on the Indoneisa Stock Exchange (IDX) totaling seven companies. The results of the study using the Beneish ratio index show that in 2019 the number of manufacturing companies classified as non-manipulators both LQ45 and non-LQ45 and in 2020 the results of the Beneish ratio index show that manufacturing companies are classified as non-manipulators, because the companies classified as non-manipulators have no more than three parameter indices of the eight parameter indices that have been determined. In the Beneish M-score results, there is one company that is classified as a manipulator where there is a possibility of an increase in the parameter index which affects profit and loss which causes the company to have poor prospects. Companies categorized as non-manipulator companies based on the Beneish M-score index can be assessed that the company has good financial performance, is able to manage items in the financial statements effectively and efficiently such as in profit and loss, good financial performance can indicate the company has good earnings quality, Beneish M-score results when associated with earnings quality in relevance means that the financial statements and measurement index on the company accurately reflect the company's operational performance, providing an accurate overview of the company's financial condition.