A HEALTHY MANIPULATION OR AN HONEST FINANCIAL DISTRESS: FUSING M-SCORE AND Z-SCORE ANALYSIS

Abstract

Altman’s Z-Score and Beneish’s M-Score are still the most prominent method in detecting incoming financial distress and fraud respectively. However, there has been no prior research that fuses the analysis of both tests. This thesis aims to emphasize the importance of proceeding with Altman’s Z-Score default risk test after conducting Beneish’s M-Score fraud test. The research sample companies are four companies PT. Unilever Indonesia Tbk., PT. Telekomunikasi Indonesia Tbk., PT. Bumi Resources Tbk. and PT. Energi Mega Persada Tbk. The method of this research is mixed method using secondary data. The result shows that regardless of how the sample companies are deemed to be either financially stable or in a financially distressed state, it is an essential procedure to by the very least consecutively conduct Beneish’s M-Score fraud test right after conducting Altman’s Z-Score default risk test or vice versa, to have a certain grasp during an initial analysis of a company.