Instructional Case: Detecting Earnings Manipulation

1999 ◽  
Vol 14 (1) ◽  
pp. 145-176 ◽  
Author(s):  
Christine I. Wiedman
Keyword(s):  
Peer Group ◽  
Academic Research ◽  
Probit Model ◽  
Financial Statements ◽  
Research Literature ◽  
Financial Statement ◽  
The Internet ◽  
Master's Level ◽  
Earnings Manipulation ◽  
Financial Statement Analysis

This case focuses on the use of financial statement analysis in the detection of earnings manipulation. Specifically, it draws on advances in the accounting research literature and provides a way of integrating this knowledge into an auditing or master's level accounting/financial statement analysis course. Students are required to assess the probability that a set of financial statements contain fraud by analyzing excerpts from the company's financial and proxy statements, and applying the Beneish (1997) probit model for detecting earnings manipulation. Students are also encouraged to utilize the Compustat database to compare the company's financial data to a peer group of firms in the industry. The appendix provides a discussion of academic research relevant to the analysis, including a description of simple analytical procedures, a listing of important qualitative risk factors to consider in assessing the likelihood of fraud (in part from Statement on Auditing Standards No. 82), and an in-depth description of the Beneish (1997) probit model. A spreadsheet is made accessible via the Internet for easy application of the model to the company in this case and to other companies.

Financial Statement Analysis Under IFRS

2018 ◽  
pp. 696-712
Author(s):  
Yasemin Zengin Karaibrahimoglu ◽  
Gökçe Tunç
Keyword(s):  
New York ◽  
Financial Reporting ◽  
Stock Exchange ◽  
Financial Statements ◽  
Financial Statement ◽  
Financial Statement Analysis ◽  
Financial Reports ◽  
York Stock Exchange ◽  
Key Points ◽  
Recent Developments

This chapter provides a clear conceptual discussion on the recent developments in the Financial Statement Analysis (FSA). It presents how IFRSs changed the outlook of the financial reporting and the analysis and explains the key points that should be considered in FSA. Using a case study on the financial reports of Turkcell, a communication and technology company listed both on the New York Stock Exchange (NYSE) and the Borsa Istanbul (BIST), the differences between IFRSs and U.S. GAAP accounting standards in the measurement of overall financial performance and position are documented. Overall findings show that IFRSs change the appearance of financial statements significantly. While IFRS reporting extenuates “the bottom line” it accentuates total assets with higher shareholder equity compared to U.S. GAAP. This chapter might be a practical guide for users, preparers, and regulators to understand the cosmetic impact of IFRSs on financial statements.

Amtek Auto debacle: financial statement analysis

2020 ◽  
Vol 10 (2) ◽  
pp. 1-24
Author(s):  
Asheesh Pandey
Keyword(s):  
Learning Outcomes ◽  
Financial Statements ◽  
Financial Statement ◽  
Financial Statement Analysis ◽  
Content Type ◽  
Academic Level ◽  
Reserve Bank ◽  
Financial Decision ◽  
The Relationship ◽  
A Company

Learning outcomes The learning outcomes are as follows: developing an understanding of financial statement analysis among students; students would be able to calculate various ratios, understand their meaning and interpret them to take a financial decision; and exploring the relationship between financial leverage and risk. Case overview/synopsis Amtek Auto is a leading auto-components manufacturer established in 1988 which entered into bankruptcy in through the order of Reserve Bank of India in 2017. The company started with a humble beginning and later on the promoter decided to expand exponentially both through organic as well as inorganic growth in past 15 years. To grow a company kept on taking debt which made it riskier and deteriorated its financial position over a period. The case covers a 10-year timeline from 2008 to 2017. It gives an opportunity to analyze its financial statements to understand how its decisions shaped its performance Complexity academic level The case aims for students to take a comprehensive view of the financial statement analysis of Amtek Auto including the following: vertical and horizontal analysis; comprehensive ratio analysis including liquidity, profitability, leverage and turnover ratios with special emphasis on debt as a double-edged sword; analysis of Armtek Auto’s financial performance over a period of 10 years. Supplementary materials Teaching Notes are available for educators only. Subject code CSS 1: Accounting and Finance.

scholarly journals ANALISIS VALUASI SAHAM BUMN MENGGUNAKAN METODE DIVIDEND DISCOUNTED MODEL DAN ECONOMIC VALUE ADDED

2021 ◽  
Vol 17 (2) ◽  
pp. 115-128
Author(s):  
Irvan Liunardi Senjaya
Keyword(s):  
Intrinsic Value ◽  
Economic Value ◽  
Value Added ◽  
Secondary Data ◽  
Financial Statements ◽  
Financial Statement ◽  
Economic Value Added ◽  
Financial Statement Analysis ◽  
Book Value ◽  
Value Added Model

This research is aimed at analyzing the valuation of BUMN shares with the dividend discounted model and economic value added model. This study is also aimed to teach early or novice investors about financial statement analysis, which contains information about companies' finances and companies' actions in the following years. Financial statement analysis is not limited to the Price-to-Earnings Ratio (P/E Ratio) and Price-to-Book Value (PBV). There are various analyses that can be used, such as the dividend discounted model aiming to find the company's intrinsic value and economic value added aiming to find economic value that will benefit investors. For this research, the researchers need 12 state-owned-enterprises (SOEs) to be used as samples and secondary data. The data used for this research are financial statements (2015-2019 period) and dividends per share (2015-2019 period). The data used were obtained before the event of CoVID-19. The results show that from the dividend discounted model and economic value added, 7 out of 12 SOEs are undervalued and have economic value for investors.             

scholarly journals Issuance Of Subsidiary Stock As An Earnings Management Strategy

2011 ◽  
Vol 21 (1) ◽  
Author(s):  
Susan Perry Williams ◽  
Thomas H. Williams
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Management Strategies ◽  
Academic Research ◽  
Financial Statements ◽  
Research Literature ◽  
Securities And Exchange Commission ◽  
Net Income ◽  
Earnings Expectations ◽  
Income Statement

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; tab-stops: 1.0in 1.5in 2.0in 2.5in 3.0in 3.5in 4.0in 4.5in 5.0in 5.5in 6.0in;"><span style="font-family: Times New Roman; font-size: x-small;">Arthur Levitt, chairman of the Securities and Exchange Commission, expressed concern that the pervasiveness of earnings management in American corporate financial statements threatens the integrity of financial reporting.<span style="mso-spacerun: yes;">&nbsp; </span>Levitt referred to the &ldquo;cookie jar&rdquo; phenomenon wherein U.S. firms have earmarked opportunities to &ldquo;find gains&rdquo; when earnings are less than anticipated.<span style="mso-spacerun: yes;">&nbsp; </span>The academic research literature includes a large number of studies on earnings management strategies.<span style="mso-spacerun: yes;">&nbsp; </span>One relatively unexplored strategy is the use of stock issuances by subsidiaries to generate gains under the provisions of SEC Staff Accounting Bulletin No. 51.<span style="mso-spacerun: yes;">&nbsp; </span>Based upon a sample of 125 observations of this accounting choice over the period 1985 through 1997, our study provides compelling evidence that recognition of gains on the issuance of subsidiary stock coincides with periods when earnings fail to meet expectations (as measured by analysts&rsquo; forecasts), and that the recognition of these gains in the income statement is effective in achieving earnings expectations. Further, the amounts of these gains are large relative to pre-gain net income</span></p>

scholarly journals Using the Web to Connect Research and Practice: Towards a Discipline of Evidence-Based Practice

10.28945/2542 ◽  
2002 ◽  
Author(s):  
Daniel L. Moody
Keyword(s):  
Explicit Knowledge ◽  
Point Of Care ◽  
Academic Research ◽  
Research Literature ◽  
The Internet ◽  
Full Time ◽  
Similar System ◽  
Research And Practice ◽  
Research Results ◽  
Common Information

In most disciplines, research findings take a long time to filter into practice, if they ever do at all. The result of this is under-utilisation of research results and sub-optimal practices. There are a number of reasons for the lack of knowledge transfer. Firstly, practitioners don’t have the time to keep up with the latest research%in professional practice, there is little time available to read academic journals. Once they have completed their formal education, they tend to rely on tacit knowledge acquired through experience rather than explicit knowledge in the form of academic research. In addition, the volume and geometric growth of research literature results in a massive problem of information overload%it is not humanly possible for practitioners (and challenging even for full-time researchers) to keep up with all the research published in their field. From the “supply side”, academic research is primarily focused on the production rather than distribution of knowledge%there is little investment in the distribution of research results beyond academic communities. The Internet provides a potential solution to this problem, in that it provides a common information infrastructure for connecting those who produce knowledge (researchers) and those who need tc apply it (practitioners). This paper describes two projects which use the Internet to make research results directly available to practitioners in the workplace. The first is a project in a health department which provides medical staff with on-line access to the latest medical research at the point of care. The second is a project currently in progress to implement a similar system to support IS practitioners. Finally, we draw some general lessons about how to improve transfers of knowledge from research and practice, which could be applied in any discipline.

scholarly journals THE IMPACT OF FINANCIAL STATEMENT ANALYSIS ON THE PROFITABILITY ASSESSMENT (APPLIED STUDY OF KIRKUK COMPANY FOR PRODUCING CONSTRUCTIONAL MATERIALS)

2018 ◽  
Author(s):  
Amanj Mohamed Ahmed
Keyword(s):  
Secondary Data ◽  
Financial Statements ◽  
Financial Statement ◽  
Financial Statement Analysis ◽  
Balance Sheets ◽  
The Past ◽  
Applied Study ◽  
Research Goal ◽  
The Impact ◽  
Profitability Assessment

The present study entitled “financial statement analysis and assessing the profitability of the Kirkuk’s Company for producing constructional materials”. The main goal of the accounting department in the firms is to prepare the reliable financial statements in order to make their valid balance sheets, income statements and cash flow statement. This paper determines the confirming effects of the financial statement analysis to assess the profitability of the Kirkuk Company. The data in this study is based on the secondary data and it collected from the past and present performance of Kirkuk’s Company for producing constructional materials. To achieve the research goal, four categories of the financial ratios were utilized for testing the study’s hypothesis. This group of ratios was applied to assess the financial situation of the company in the years between “2005 to 2011” by using different techniques of financial statement analysis. The results clearly show that, there are insignificant relationships between profitability with asset regulated and assets utilization. At the same times, there is a weak relationship between profitability and liquidity.

MODERN PROBLEMS OF ACCOUNTING ANALYSIS AND AUDIT

2020 ◽  
Author(s):  
S. A. Soroka ◽  
O. A. Evdokimova
Keyword(s):  
Investment Decisions ◽  
Financial Statements ◽  
Financial Statement ◽  
Financial Statement Analysis ◽  
Important Stage ◽  
Ongoing Work ◽  
Further Development

Financial statement analysis and audit is the important stage of the process of accounting. Users of financial statements take managerial and investment decisions that are based on the finding, thereby influencing ongoing work and further development. Accuracy of these decisions might be affected by the problems arising in the process of the analysis and audit. The article describes major problems encountered in the process of the analysis and audit as well as their solutions

scholarly journals Using A Project/Case Study To Teach Financial Statement Analysis In The Introductory Business Finance Course

2011 ◽  
Vol 4 (1) ◽  
pp. 91
Author(s):  
John T. Rose
Keyword(s):  
Financial Performance ◽  
Cash Flow ◽  
Financial Statements ◽  
Financial Statement ◽  
Complete Picture ◽  
Financial Statement Analysis ◽  
Microsoft Excel ◽  
Introductory Course ◽  
The Past

This study presents a project, written in the form of a case study and accompanied by a Microsoft Excel template, to be assigned to an introductory course in business finance. The objective is to give introductory finance students an application of financial statement analysis beyond that provided by the typical end-of-chapter problems. The project is designed to enable students to link together the information provided by the several analytical toolscommon size financial statements, analytical ratios, and the cash flow statementand so obtain a complete picture of a firms financial performance over the past several years and relative to the average firm in the industry.

scholarly journals Financial Statement Analysis of ONGC LTD. with reference to: Horizontal Analysis & Common Size Analysis

2013 ◽  
Vol 1 (2) ◽  
pp. 215-225
Author(s):  
Mayur Rao
Keyword(s):  
Capital Structure ◽  
Financial Statements ◽  
Financial Statement ◽  
Size Analysis ◽  
Financial Statement Analysis ◽  
Liquid Asset ◽  
Fixed Assets ◽  
The World ◽  
Illiquid Assets

ONGC was ranked at 171th position in Forbes Global 2000 list of the worlds‘ biggest companies for 2012. ONGC has grown multifold to become one of the largest Exploration & Production (E&P) companies in the world. The financial statement Analysis of ONGC for 2012 as compared to 2011 will reveal many things.The present paper focuses on comparison of financial statements of ONGC for 2011 & 2012 with Horizontal & Common size analysis. Main objective is to identify various reasons of increase or decrease in variables of financial statements esp. Profit at varied stages, and to conclude financial position.It was found from study that ONGC modifies its capital structure in 2012, by sourcing out more and more funds from own equity. ONGC‘s investment is increased in fixed assets and decreased in liquid asset in 2012 as compared to 2011, concluding much money blockage in illiquid assets. Still ONGC gets nice increase of PAT, which satisfies shareholders & Investors.

scholarly journals The lack of Financial Statement Spplication in Kosovo’s Farms and its Consequences

2016 ◽  
Vol 3 (2) ◽  
pp. 391
Author(s):  
MSc. Jehona Shkodra ◽  
Dr.Sc. Mustafe Pllana ◽  
MSc. Ekrem Gjoka
Keyword(s):  
Developing Countries ◽  
Financial Statements ◽  
Financial Statement ◽  
Financial Statement Analysis ◽  
Research Questions

The application of financial statement analysis in business activities is essential but this is often seen as frivolous in developing countries and in Kosovo as well . From the research conducted in hundred farms in different regions of Kosovo we understood that the application level of financial statement applied is low and in few farms it does not exist at all. The following research questions were used for this research:1. Why does this situation happen? 2. To what extent are farmers familiar with the financial statement analysis? 3. What is the farmer’ willingness to advance in financial statement analysis field? 4. What would be the consequences due to the lack of application of financial statements? 

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