ПРИМЕНА М-СКОРА У ДЕТЕКТОВАЊУ МАНИПУЛАЦИЈА У ФИНАНСИЈСКИМ ИЗВЕШТАЈИМА ЈАВНИХ ПРЕДУЗЕЋА: ШТА СЕ НАЛАЗИ ИСПОД ПОВРШИНЕ БИЛАНСА?
APPLICATION OF THE M-SCORE IN DETECTING MANIPULATIONS IN THE FINANCIAL STATEMENTS OF PUBLIC COMPANIES: WHAT LIES BENEATH THE SURFACE OF THE BALANCE SHEET?

Author(s): Dejan Malinić, Maja Ribić
Subject(s): Accounting - Business Administration, ICT Information and Communications Technologies, Socio-Economic Research
Published by: Savez računovođa i revizora Republike Srpske
Keywords: public enterprises; state-owned enterprises; performance measurement; accrual accounting; manipulations; fraud; M-Score; fraud triangle;
Summary/Abstract: Investigating the operations of public enterprises has long posed a significant challenge. These entities are highly distinctive due to their economic, social, and political relevance. Their importance further stems from the fact that many are fully or partially state-owned, potentially contributing substantially to the gross domestic product and employing a considerable workforce. Moreover, public enterprises often rely on state budgets, particularly during periods of crisis, which can obscure inefficiencies. Empirical evidence from numerous studies worldwide indicates that state-owned enterprises are generally less efficient than private companies, suggesting that the state’s ownership role is not always exercised optimally. The efficiency of public enterprises is further challenged by low levels of corporate governance, limited business transparency, absence of genuine accountability, and inadequate monitoring, all compounded by exposure to political influence. Under such circumstances, particularly when performance falls short of expectations or lags behind that of comparable private companies, management may face the delicate task of presenting results more favorably than they actually are, potentially giving rise to financial statement manipulation. In light of these specific characteristics, this paper focuses on examining the likelihood of fraud in the financial reporting of public enterprises. In this context, the five-component Beneish M-Score model was employed to assess the likelihood of financial statement manipulation in public enterprises, with a particular focus on large entities. The findings reveal a tangible risk of manipulation, highlighting that preventive measures are at least as crucial as fraud detection in mitigating or substantially reducing potential adverse consequences. Accordingly, these results are expected to heighten the attention of relevant institutions overseeing the operations of public enterprises, and to promote the use of early warning signals for the proactive identification and prevention of fraud risk.

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