Analysis Using Beneish M-Score Model to Detect Financial Statement Fraud on Mining Companies Listed in IDX

Abstract

Abstract. Nowadays, economic developments are growing rapidly and often fluctuate. By
2015, the Indonesian economy in the mining sector has declined. The decline is due to a decrease in China's demand on mining materials which ultimately has a negative impact on the domestic mining sector. Such circumstances can lead to fraudulent acts of financial
statements to make window dressing. This study aims to determine how much percentage
of companies indicated to commiting financial statements fraud based on Beneish M-Score
Model.
Beneish M-Score Model uses eight financial ratios to detect financial statement fraud. If
the Beneish M-Score result shows a larger number of -2.22, then the company is indicated
to commit fraudulent financial statements (manipulator), whereas if the result shows a
number smaller than or equal to -2.22, then the company is indicated not to commit
fraudulent financial statements (nonmanipulator).
This research was conducted by using analytical descriptive method. The sample selection
was done by purposive sampling technique with samples of twenty mining companies
listed on IDX during 2015-2017. The data are collected from financial statement published
on the IDX website. After the ratio calculation, then the result is entered into the Beneish
M-Score formula. Then, the Beneish M-Score is analyzed for further interpretation.
This study indicates that no company is indicated to commit fraudulent financial statements
in the period of 2015-2017 respectively. By 2015, 40% of companies are indicated as
manipulators. In 2016, the company indicated as a manipulator of 60%, while in 2017 the
percentage decreased to 30%. Based on the eight financial ratios used to calculate the
Beneish M-Score, the ratio of Total Accruals to Total Assets (TATA) is the best ratio that
describes the possibility of fraudulent financial statements performed by the manipulator
company.

Keywords: fraudulent financial statements, Beneish M-Score Model, manipulator