IDENTIFYING PROBABLE FRAUDULENCE IN FINANCIAL STATEMENTS OF SELECTED AUTOMOBILE COMPANIES

Abstract

A deliberate misstatement of material facts by management in the books of accounts of the companies with a view to deceive investors, creditors and other stakeholders is known as Financial Statements Fraud. Some of the common techniques for financial statement fraud include overstatement of assets, sales and profits while understatement of liabilities, expenses or losses. Due to such kind of falsification, sometimes the elements of financial statements do not represent the true picture of the companies. The main objective of this study is to identify the probabilities of financial statement fraud and the determinants discriminating the selected automobile companies between possible fraud and possible non-fraud companies for the period of ten years (2008-09 to 2017-18) using the Beneish Model and Discriminant Analysis. The findings of the study indicate a 40% chance of Bajaj Auto Ltd. being possibly fraudulent for the selected time periods. This study reveals that Total Accruals to Total Assets Index and Day’s Sales Receivable Index are the most important determinants for discriminating the selected automobile companies between possible fraud and possible non-fraud companies.