Answer-first summary for fast verification
Answer: Company Z
The correct answer is C. In the Beneish model, M-scores closer to zero (less negative) indicate a higher probability of earnings manipulation. Company Z has the highest M-score of -1.50, which is closest to zero among all three companies. Additionally, the threshold for potential manipulation in the Beneish model is typically -1.78, so scores above this threshold (less negative) suggest higher manipulation risk. Company Z's score of -1.50 is well above this threshold, indicating the highest probability of earnings manipulation.
Author: LeetQuiz Editorial Team
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Based on the Beneish model M-scores below, which company has the highest probability of earnings manipulation?
| Company | Current Year | Prior Year | Change in M-Score |
|---|---|---|---|
| X | -2.01 | -1.72 | -0.29 |
| Y | -1.86 | -1.98 | 0.12 |
| Z | -1.50 | -1.33 | -0.17 |
A
Company X
B
Company Y
C
Company Z
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