The Prediction of Earnings Manipulation: Development of a Model

Document Type : Research Paper


1 Imam Khomeini International University

2 Islamic Azad University of Qazvin


Earnings Manipulation within GAAP same of Earnings Management, that may be Efficient or Opportunistic. But Earnings manipulation is fraud through violation of GAAP. However, Earnings Manipulation is prevented from properly evaluate the company's performance. The development of a model that can be used to help predict earnings manipulation, it can be provide possible to better evaluate the company's performance. Therefore, the aim of this paper is to adjustment coefficients of beneish model and development of a new model for prediction of earnings manipulation based on the best predictor variables. For this purpose, all manufacturing firms of Tehran Stock Exchange during the years 2002- 2012, include 990 Observation, with the discriminant and logit analysis, were studied. The results indicate that on Iran economic environment, beneish model, not able to identify earnings manipulation. the adjusted beneish model and developed models of discriminant and logit analysis approach, respectively with overall accuracy 72%, 75% and 81%, is able to identify earnings manipulator and non- manipulator firms. Also evidence showed that accounting information is useful for prediction of earnings manipulation.


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