Using Quantitative Methods to Detect Financial Statement Manipulation for SMEs in an emerging market: Case of Albania

Using Quantitative Methods to Detect Financial Statement Manipulation for SMEs in an emerging market: Case of Albania | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Using Quantitative Methods to Detect Financial Statement Manipulation for SMEs in an emerging market: Case of Albania Almina Doko, Rezarta Shkurti This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-6307042/v1 This work is licensed under a CC BY 4.0 License Status: Published Journal Publication published 02 Jun, 2025 Read the published version in Digital Finance → Version 1 posted 9 You are reading this latest preprint version Abstract This paper examines the effectiveness of the Beneish M-Score model in identifying financial statement manipulation among small and medium entities in an emerging and under-researched market such as Albania. Using a sample of 247 Albanian companies across various sectors, the study applies the M-Score financial statements from years 2022 and 2023 to assess the model’s relevance in the Albanian economic context. Findings indicate varying degrees of alignment with the M-Score’s fraud detection benchmarks, reflecting both successful identification of potential manipulation and limitations due to regional economic characteristics and timeliness restrictions of the model application. Additionally, the study integrates Pearson correlation analysis to evaluate the relationship between Beneish variables and manipulation risks, identifying as key predictors the Days Sales in Receivables Index (DSRI), Sales Growth Index (SGI), and Leverage Index (LVGI). This dual approach enhances the understanding of the M-Score’s practical application and highlights its potential for detecting financial statement manipulation in emerging markets. By providing a robust framework for financial transparency, this research underscores the importance of tools like the M-Score in fostering trust within Albania’s corporate and financial sectors. JEL: M41, M42, M21 Financial statements Beneish M-score Pearson correlation analysis fraud detection Full Text Additional Declarations No competing interests reported. Supplementary Files DataFinancialReports.xlsx Cite Share Download PDF Status: Published Journal Publication published 02 Jun, 2025 Read the published version in Digital Finance → Version 1 posted Editorial decision: Revision requested 07 Apr, 2025 Reviews received at journal 07 Apr, 2025 Reviews received at journal 02 Apr, 2025 Reviewers agreed at journal 02 Apr, 2025 Reviewers agreed at journal 01 Apr, 2025 Reviewers invited by journal 01 Apr, 2025 Editor assigned by journal 27 Mar, 2025 Submission checks completed at journal 26 Mar, 2025 First submitted to journal 25 Mar, 2025 You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-6307042","acceptedTermsAndConditions":true,"allowDirectSubmit":false,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":439722602,"identity":"f524d654-e388-4f9d-84c0-08fc802cee9b","order_by":0,"name":"Almina Doko","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAABEklEQVRIie3RsUoDMRgH8P9xcB28eGsW7StYbjzfxKUh4C1GBJcONwQC2azrgaV9hYrgXAlclz7ADS7i6lAQHIu5a09R4uLUIf/pS8iP70sC+PjsY3rAYleGwAiIEMjtAqF0kvAHWVkSfZHgT/JdBhpNm27fTRJ1wMxVgbPkTpmUTM3lYV/pNUYZk70nJ6GGzE1ZQZTPFefk0VzbwVSJVc5kzNyDNSSOIGR9kRpLmLbETmjseTfpt2QDMWvJpCMbS5IXJzlpCNEQc0s4kR2xhaTuLoOWjKm4r8/5YFLlljCFYZWnmrq7HC9vHt7jj1Mxrbmhb0XGZmr5inWRHd0mfOG8/u7hfq2H6P7Hx8fHx+c/+QTUr2ISDbdUfgAAAABJRU5ErkJggg==","orcid":"","institution":"University of Tirana","correspondingAuthor":true,"prefix":"","firstName":"Almina","middleName":"","lastName":"Doko","suffix":""},{"id":439722603,"identity":"524680ce-c4df-4fae-adfa-7cdb04cb2d4f","order_by":1,"name":"Rezarta Shkurti","email":"","orcid":"","institution":"University of Tirana","correspondingAuthor":false,"prefix":"","firstName":"Rezarta","middleName":"","lastName":"Shkurti","suffix":""}],"badges":[],"createdAt":"2025-03-25 22:53:08","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-6307042/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-6307042/v1","draftVersion":[],"editorialEvents":[{"content":"https://doi.org/10.1007/s42521-025-00137-4","type":"published","date":"2025-06-02T15:57:06+00:00"}],"editorialNote":"","failedWorkflow":false,"files":[{"id":84242965,"identity":"049916a8-9b84-452c-992d-6b7e48cbb0f5","added_by":"auto","created_at":"2025-06-09 16:12:16","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":446195,"visible":true,"origin":"","legend":"","description":"","filename":"UsingQuantitativeMethodstoDetectFinancialStatementManipulationforSMEsinanemergingmarketCaseofAlbania.pdf","url":"https://assets-eu.researchsquare.com/files/rs-6307042/v1_covered_ca7d21c8-bf31-4ce4-8e8a-fdcb5e62469f.pdf"},{"id":81172123,"identity":"f481138a-a6b7-491c-a660-a166a12e21ee","added_by":"auto","created_at":"2025-04-23 05:33:41","extension":"xlsx","order_by":0,"title":"","display":"","copyAsset":false,"role":"supplement","size":321573,"visible":true,"origin":"","legend":"","description":"","filename":"DataFinancialReports.xlsx","url":"https://assets-eu.researchsquare.com/files/rs-6307042/v1/8360f1b73eb3d82ad5293097.xlsx"}],"financialInterests":"No competing interests reported.","formattedTitle":"Using Quantitative Methods to Detect Financial Statement Manipulation for SMEs in an emerging market: Case of Albania","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":true,"hideJournal":false,"highlight":"","institution":"","isAcceptedByJournal":true,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"digital-finance","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":false,"externalIdentity":"dfin","sideBox":"Learn more about [Digital Finance](http://link.springer.com/journal/42521)","snPcode":"42521","submissionUrl":"https://submission.nature.com/new-submission/42521/3","title":"Digital Finance","twitterHandle":"","acdcEnabled":true,"dfaEnabled":true,"editorialSystem":"em","reportingPortfolio":"Springer Hybrid","inReviewEnabled":true,"inReviewRevisionsEnabled":false},"keywords":"Financial statements, Beneish M-score, Pearson correlation analysis, fraud detection","lastPublishedDoi":"10.21203/rs.3.rs-6307042/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-6307042/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eThis paper examines the effectiveness of the Beneish M-Score model in identifying financial statement manipulation among small and medium entities in an emerging and under-researched market such as Albania. Using a sample of 247 Albanian companies across various sectors, the study applies the M-Score financial statements from years 2022 and 2023 to assess the model’s relevance in the Albanian economic context. Findings indicate varying degrees of alignment with the M-Score’s fraud detection benchmarks, reflecting both successful identification of potential manipulation and limitations due to regional economic characteristics and timeliness restrictions of the model application. Additionally, the study integrates Pearson correlation analysis to evaluate the relationship between Beneish variables and manipulation risks, identifying as key predictors the Days Sales in Receivables Index (DSRI), Sales Growth Index (SGI), and Leverage Index (LVGI). This dual approach enhances the understanding of the M-Score’s practical application and highlights its potential for detecting financial statement manipulation in emerging markets. By providing a robust framework for financial transparency, this research underscores the importance of tools like the M-Score in fostering trust within Albania’s corporate and financial sectors.\u003c/p\u003e\n\u003cp\u003e\u003cem\u003eJEL: M41, M42, M21\u003c/em\u003e\u003c/p\u003e","manuscriptTitle":"Using Quantitative Methods to Detect Financial Statement Manipulation for SMEs in an emerging market: Case of Albania","msid":"","msnumber":"","nonDraftVersions":[{"code":1,"date":"2025-04-23 05:33:37","doi":"10.21203/rs.3.rs-6307042/v1","editorialEvents":[{"type":"communityComments","content":0},{"type":"decision","content":"Revision requested","date":"2025-04-07T19:38:57+00:00","index":"","fulltext":""},{"type":"editorInvitedReview","content":"","date":"2025-04-07T18:09:19+00:00","index":"hide","fulltext":""},{"type":"editorInvitedReview","content":"","date":"2025-04-02T21:24:52+00:00","index":"hide","fulltext":""},{"type":"reviewerAgreed","content":"311886897419164134619118050600321082329","date":"2025-04-02T20:58:59+00:00","index":"hide","fulltext":""},{"type":"reviewerAgreed","content":"60604035329775370388577169316521954526","date":"2025-04-01T14:45:37+00:00","index":"hide","fulltext":""},{"type":"reviewersInvited","content":"","date":"2025-04-01T08:50:45+00:00","index":"","fulltext":""},{"type":"editorAssigned","content":"","date":"2025-03-27T06:46:29+00:00","index":"","fulltext":""},{"type":"checksComplete","content":"","date":"2025-03-26T12:20:05+00:00","index":"","fulltext":""},{"type":"submitted","content":"Digital Finance","date":"2025-03-25T22:46:05+00:00","index":"","fulltext":""}],"status":"published","journal":{"display":true,"email":"[email protected]","identity":"digital-finance","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":false,"externalIdentity":"dfin","sideBox":"Learn more about [Digital Finance](http://link.springer.com/journal/42521)","snPcode":"42521","submissionUrl":"https://submission.nature.com/new-submission/42521/3","title":"Digital Finance","twitterHandle":"","acdcEnabled":true,"dfaEnabled":true,"editorialSystem":"em","reportingPortfolio":"Springer Hybrid","inReviewEnabled":true,"inReviewRevisionsEnabled":false}}],"origin":"","ownerIdentity":"a558ddc0-aaea-4024-95c8-d710f5a11339","owner":[],"postedDate":"April 23rd, 2025","published":true,"recentEditorialEvents":[],"rejectedJournal":[],"revision":"","amendment":"","status":"published-in-journal","subjectAreas":[],"tags":[],"updatedAt":"2025-06-09T16:08:11+00:00","versionOfRecord":{"articleIdentity":"rs-6307042","link":"https://doi.org/10.1007/s42521-025-00137-4","journal":{"identity":"digital-finance","isVorOnly":false,"title":"Digital Finance"},"publishedOn":"2025-06-02 15:57:06","publishedOnDateReadable":"June 2nd, 2025"},"versionCreatedAt":"2025-04-23 05:33:37","video":"","vorDoi":"10.1007/s42521-025-00137-4","vorDoiUrl":"https://doi.org/10.1007/s42521-025-00137-4","workflowStages":[]},"version":"v1","identity":"rs-6307042","journalConfig":"researchsquare"},"__N_SSP":true},"page":"/article/[identity]/[[...version]]","query":{"redirect":"/article/rs-6307042","identity":"rs-6307042","version":["v1"]},"buildId":"8U1c8b4HqxoKbykW_rLl7","isFallback":false,"isExperimentalCompile":false,"dynamicIds":[84888],"gssp":true,"scriptLoader":[]}