FINANCIAL STATEMENT FRAUD DETECTION USING ALTMAN Z-SCORE AND BENISH M-SCORE: a comparative case study of Dewan Housing Finance Corporation limited(DHFL) and LIC Housing Finance limited in the Indian Context

First, the Altman Z’’-Score failed to provide any valuable early-warning signals to detect earnings management at DHFL in this case. The model put DHFL in the safety zone every year and classified it as having higher values compared to the control company, whereas the latter was moving closer to the grey zone. For a creditor, this model summarizes the reported values of the capital strength and liquidity, which looked good in the case of DHFL.   Second, the Beneish M-Score performed slightly better but still in the insufficient manner. In this case, both companies were distinguished by the test as expected – one year for DHFL and zero for LIC HF, but the signal was identified only in one out of three years and does not recur. Moreover, the M-Score is sensitive to non-recurring items and small balance sheet items like accounts receivable, which are not economically important for creditors.   Third, the two models contradict each other. In FY2017, the models gave different results. This fact proves the conclusions made in the case of Toshiba, that choosing a model determines the result.   Fourth, and possibly the most telling indicator of a problem, was the discrepancy and not a single score, namely, the balance sheet date on which there were very different receivable numbers in two years of annual reports. After all, any model screen is only as reliable as the consistency of the underlying numbers reported, and restatements need to be flagged as well as the scores. These findings are based on a single company-pair and from a lender’s perspective. This does not mean that the models don’t work in general, or that this research proves that they do.

  Altamn,E.I(1968). FINANCIAL RATIOS, DISCRIMINANT ANALYSIS AND THE PREDICTION OF CORPORATE BANKRUPTCY - Altman - 1968 - The Journal of Finance - Wiley Online Library   Altman, E. I., Hartzell, J., & Peck, M. (1995). Emerging markets corporate bonds: A scoring system. Salomon Brothers, New York (the source of the Z''-Score variant used in Chapter 4). Reprinted in E. I. Altman & R. M. Levich (Eds.) Emerging Market Capital Flows (1998) Springer. Emerging market corporate bonds — a scoring system | Springer Nature Link   Beneish, M. D. (1999). The detection of earnings manipulation. Financial Analysts Journal, 55(5) 24–36.The Detection of Earnings Manipulation: Financial Analysts Journal: Vol 55, No 5 2.1     This study by Güler, S., Emgin, O. And Uçma T. From 2013 is titled "A manifest for ethics in emerging markets: The prediction of manipulation in Turkey by using Beneish’s model." . The study was published by MÖDAV. The Turkish Foundation, for Collaboration of Accounting Academicians. The study can be found in the journal archive.Muhasebe Bilim Dünyası Dergisi Ana Sayfa 2.2    Nindito, M., Avianti, I., Koeswayo, P. S., & Tanzil N. D. (2019). Financial statement fraud: An investigation into its prevalence in cross sector industries, in Indonesia. Journal of Applied Economic Sciences, XIV, Winter, 4(66) 1180–1190. Journal record:https://www.ceeol.com/search/journal-detail?id=1011 2.3    Parikh, P. N. (2024). Checking stability and spotting fraud in chosen Indian pharmaceutical companies, with Altman Z-Score and Beneish M-Score models. International Journal of Social Science Humanity & Management Research, 3(6)Evaluating  Financial Stability and Fraud Detection in Selected Indian Pharmaceutical Companies Using Altman Z Score and Beneish M Score Models 2.4 Bhavani, G., & Amponsah, C. T. (2017). M-. Z-Score, for detection of accounting fraud. Accountancy. The Public Interest, 68–86. https://www.researchgate.net/publication/318489930_M-Score_and_Z-Score_for_detection_of_Accounting_Fraud  2.5     Haryadi, A., Nurmalasari, R., & Yanti, H. B. (2026). Comparative analysis of the effectiveness of three models in detecting financial statement fraud. E-Jurnal Akuntansi, 36(2), 385–398 https://ejournal1.unud.ac.id/index.php/akuntansi/article/view/3488