Detecting creative accounting in a company's financial numbers

When their operational parameters worsen, and the stress starts showing in the financial numbers, a lot of businesses get a tad creative with their accounts so that investors don't take to their heels. Can this creativity be detected through analysing the financial results that are released? Not with certainty, but as a probability, yes. What we have here is a probabilistic score that measures a company's resemblance to other companies where the accounting has been creative. We have developed the Modified C-score which indicates the probability of financial manipulations based on a quantitative method. We did that by modifying Ja

This article was originally published on May 01, 2020.