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Earnings Managament in Russian Companies

Student: Daniil Mamontov

Supervisor: Elena Rogova

Faculty: St.Petersburg School of Economics and Management

Educational Programme: Management (Bachelor)

Year of Graduation: 2020

According to the PricewaterhouseCoopers study, every fifth company in Russia has experienced economic crimes, and 25% of them have hidden this fact by faking financial statements. Despite the importance of this problem, businessmen and investors who intend to invest in Russian companies do not have a mechanism for detecting cases of fraud with financial statements, which cause significant losses and reluctance to invest in Russian companies. The aim of this study is to adapt the existing methods for identifying fraudulent companies and combine theoretical data for this topic in one study. The need to adapt existing methods arises as a result of significant differences in accounting systems in the countries and differences in law. The data for the study was divided into two groups: companies that manipulated their reporting and companies that never did this. The first group of companies was obtained from the court archives, for the second type of companies it was assumed that if the company uses the services of an external auditor, that fact means that the company do not manipulate its reporting. After collecting the data, Beneish and Roxas models were tested at Russian companies and the result shown that in initial form the models don’t show appropriate accuracy. That proved the need for their adaptation to the conditions of the Russian market. The result of the study was in adjusting Beneish and Roxas models to the Russian market, as well as an assessment of each of the regressors individually, since the used indices can be applied not only inside the model, but independently. In addition to the practical result of the study, the most famous analytical methods for identifying corporate crimes were used and explained methodology of using this methods and conditions, which are needed to apply them.

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