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Economic Analysis: Theory and Practice
 

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Studying the specifics of manipulation of financial statements in organizations of the construction sector

Vol. 19, Iss. 9, SEPTEMBER 2020

Received: 31 August 2020

Received in revised form: 10 September 2020

Accepted: 18 September 2020

Available online: 29 September 2020

Subject Heading: ECONOMIC ADVANCEMENT

JEL Classification: G30

Pages: 1614–1645

https://doi.org/10.24891/ea.19.9.1614

Kogdenko V.G. National Research Nuclear University MEPhI, Moscow, Russian Federation
kogdenko7@mail.ru

https://orcid.org/0000-0001-9732-1174

Zavalishina A.K. National Research Nuclear University MEPhI, Moscow, Russian Federation
a.zavalishina@bk.ru

https://orcid.org/0000-0002-2713-9403

Subject. We identify the signs of manipulating the financial statements in the construction sector organizations.
Objectives. We focus on developing the analytical procedures to detect the signs of financial statements manipulation, namely, the so-called window dressing.
Methods. The methodological basis rests on general scientific principles and methods of research, like abstraction, generalization of approaches of domestic and foreign authors to the detection of manipulation of reporting, and statistical methods of information processing.
Results. We developed a classification of methods for manipulation of unsound improvement of financial statements, assessed the likelihood of misstatement of financial statements, identified the elements of poor quality items, proposed a method to detect the manipulation of reporting, based on the comparison of substandard financial statement items with reliable items and/or non-financial indicators. We tested the methodology on the data of enterprises, operating in the construction sector.
Conclusions. The study found that a likely manipulator is, usually, a micro-enterprise or a small company that does not have a credit limit, has significant relative performance of assets and liabilities of low quality, while showing high productivity and high return on assets at the average level of capital/labor ratio, and characterized by low investment and financial activity.

Keywords: reporting, manipulation, construction industry

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