Financial Statement Frauds are becoming rampant in India. Satyam accounting scandal exposed the extent to which the management can go to manipulate the numbers in financial statements. Satyam scandal also revealed the methods used in manipulations of financial statements. The Forensic Rating Model is built on the J-Score obtained after analyzing the early warning signals of corporate frauds.<\/p>\n\n\n\n
In the wake of growing incidences of the financial statements frauds, Indiaforensic designed a model whereby it becomes easier for the stakeholders of the financial statements to understand the risks involved in the financial statements. <\/p>\n\n\n\n
We term the financial forensic model as J-Score, which is a mathematical model that uses multiple financial ratios to ascertain the financial irregularities. These ratios are weighted by coefficients to identify the nature of irregularities. It is authored by CA Mayur Joshi in the year 2011. J-score which is named after Mayur Joshi, surmises that companies are incentivised to manipulate financial statements when they have high sales growth, deteriorating gross margins, rising operating expenses and rising leverage. However, the J-score<\/a> is built on the presumption that it is difficult to manipulate the cash flows. <\/p>\n\n\n\n “You can pretend to be rich but its hard to pretend that you are cash rich” <\/p><\/blockquote>\n\n\n\n They are likely to manipulate profits by accelerating sales recognition, increasing cost deferrals, raising accruals and reducing depreciation.<\/p>\n\n\n\n