Detection of Earnings Manipulation Practices in Bangladesh

Document Type: Original Research


Department of Accounting & Information Systems, University of Dhaka, Dhaka, Bangladesh


This study is conducted to detect earnings manipulation practices in selected textile companies of Bangladesh. It investigates whether the textile companies of Bangladesh are engaged in earnings manipulation of not. For testing this hypothesis, Beneish M-Score is being used collecting data of 13 textile companies from financial year 2012-2018. This study indicates a great number of earnings manipulation practices conducted in textile industries. This paper, based on Beneish M-Score, finds evidences regarding manipulation of earnings through disproportionate rise in receivables, cost deferral, less cash behind reported income, etc. by listed companies. This paper finds that the textile companies are manipulating earnings. While this model can be easily used to detect earnings manipulations using annual reports provided by listed companies, further investigations are needed to identify the reasons behind distortions in reported numbers are actually earnings manipulation or any other organizational origin. Being a cost effective tool in detecting frauds through manipulating earnings, this model can be a great tool for auditors and other respective regulatory authorities.


Ahmed, T., & Naima, J. (2016). Detection and Analysis of Probable Earnings Manipulation by Firms in a Developing Country. Asian Journal of Business and Accounting, 9(1), 59-81.
Beneish, M. D. (1999). The Detection of Earnings Manipulation. Financial Analysts Journal, 55(5), 24-36.
Beneish, M. D., & Press, E. (1993). Costs of Technical Violation of Accounting-Based Debt Covenants. The Accounting Review, 68(2), 233-257.
Eng, L. L., Sun, L., & Vichitsarawong, T. (2014). Are International Financial Reporting Standards–Based and U.S. GAAP–Based Accounting Amounts Comparable? Evidence from U.S. ADRs. Journal of Accounting, Auditing & Finance, 29(2), 163-187.
Fridson, M. S. (1993). Financial Statement Analysis: A Practitioner's Guide. John Wiley, New York.
Fung, A. (2015). Putting the Public Back into Governance: The Challenges of Citizen Participation and Its Future. Public Administration Review, 75(4), 513-522.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
Jung, B., Lee, W.‐J. & Weber, D. P. (2014). Financial Reporting Quality and Labor Investment Efficiency. Contemporary Accounting Research, 31(4), 1047-1076.
Khan, A. R., & Akter, M. (2017). An Analysis of Earninga Management: Evidence from Food & Allied Industry of Bangladesh. International Journal of Accounting & Financial Reporting, 7(2), 359-372.
Kramer, J., & Chen, J. (2010). Title of the Article. Journal Name, 110-313.
Lev, B., & Thiagarajan, R. (1993). Fundamental Information Analysis. Journal of Accounting Research, 31(2), 190-215.
Levitt, A. (1998). The Numbers Game. Securities and Exchange Commission, U.S.
Mulford, C. W., & Comiskey, E. E. (2002). The Financial Numbers Game: Detecting Creative Accounting Practices. New York: John Wiley & Sons Inc.
Nwoye, U., Obiorah, J., & Chukwunonso, E. (2015). Assessing the Risk of Fraud in Published IFRS and Nigerian GAAP Financial Reports: A Comparative Application of the Beneish Models. The IUP Journal of Accounting Research & Audit Practices, 14(1), 21-42.
Omar, N., Koya, R. K., & Sanusi, Z. M. (2014). Financial Statement Fraud: A Case Examination Using Beneish Model and Ratio Analysi. International Journal of Trade, Economics and Finance, 5(2), 184-186.
Orellana, A. R., Romero, M. J., & Garrido, T. M. (2017). Measuring fraud and earnings management by a case of study: Evidence from an international family business. European Journal of Family Business, 7, 41-53.
Salvato, C., & Moores, K. (2010). Research on Accounting in Family Firms: Past Accomplishments and Future Challenges.  Family Business Review, 23(3), 193-215.
Siegel, J. G. (1991). How to Analyze Businesses, Financial Statements, and the Quality of Earnings. Prentice Hall, New Jersey, 2nd Edition.
Tarjo, & Herawati, N. (2015). Application of Beneish M-Score Models and Data Mining to Detect Financial Fraud. Procedia - Social and Behavioral Sciences, 21(1), 924-930.
Thiruvadi, S., & Huang, H.-W. (2011). Audit committee gender differences and earnings management. Gender in Management: An International Journal, 26(7), 483-498.
Watson, J., Taylor, A., Haffman, T., Jorge, A., Sulivan, B., Chung, D., et al. (2009). Title of the Book. New York: Publisher.