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A mathematical model that uses financial ratios and eight variables to identify whether a company has manipulated its earnings. The variables are constructed from the data in the company's financial statements and, once calculated, create an M-Score to describe the degree to which the earnings have been manipulated.
Figure 1. On many standardized assessments the publishers base the standard score on a distribution with a mean of 100 and a standard deviation of 15. A score of 100 on such a test (e.g., WJIIIDRB) means that if the student scored in the middle of the distribution (Mercer & Pullen, 2009). standard score is based on a normal distrbution with a mean and a standard deviation (see Figure 1). The black line at the center of the distribution represents the mean. The turquoise lines represent standard deviations. Figure 1.