Using Altman Z score and Beneish M score Models to Detect Financial Fraud and Corporate Failure: A Case Study of Enron Corporation
The objective of this research is to determine whether Altman Z score and Beneish M model could detect financial fraud and corporate failure of Enron Corporation. Five year financial information was collected from the US SEC Edgar database covering the period 1996 to 2000. The Beneish model revealed that the financial statements for the five years studied were manipulated by management. On the basis of the analysis, the researcher argued that stakeholders would be better protected when the two models are used simultaneously than when only the Altman Z score is used. The paper recommended that Altman Z score and Beneish M Model should be used together as an integral part of every audit.