The Effects of Beneish’s M-Score Model and Financial Ratio Analyis on Fraudulent Financial Statement Indications

Abstract

The aim of this research was to collect empirical evidence on the effects of Beneish’s M-Score Model that was calculated using the eight formulas that come with it and of financial ratio analysis based on the indicators financial leverage, profitability, asset composition, liquidity, and capital turnover on fraudulent financial statement indications in manufacturing companies in the consumer goods sector listed on the Indonesia Stock Exchange over the period 2017–2020. The dependent variable in this research was a dummy variable, where a score of 1 was assigned to a company which restated its financial statements and a score of 0 was assigned to a company that did not perform any restatement. The research results showed that only the variable financial leverage had a significant effect on fraudulent financial statement indications. Meanwhile, Beneish’s M-Score Model did not have any significant effect on fraudulent financial statement indications. Data analysis in this study used STATA (Statistics Data Analysis) software version 16 which was used to perform statistical data tests.