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Fuzzy Model for Detection of Fraudulent Financial Statements: A Case Study of Lithuanian Micro and Small Enterprises

Author

Listed:
  • Erika Besusparienė

    (Vytautas Magnus University, Kaunas, Lithuania)

  • Vesa A. Niskanen

    (Vytautas Magnus University, Kaunas, Lithuania
    University of Helsinki, Finland)

Abstract

90 per cent of enterprises in the European Union (EU), including Lithuania, are small enterprises that prepare the abridged financial statements. Verifying the fairness of these reports for stakeholders is challenged due to the lack of data. The aim of this research is to develop a novel model based on fuzzy logic for detecting fraudulent financial statements in micro and small enterprises by using financial ratios suitable for abridged financial statements. The results have shown that the developed fuzzy model enables estimation of the level of fraud in each individual element of accounting. Identifying each fraudulent accounting element allows us to gain insights into the areas where the enterprise has committed fraud. The proposed model has been designed to help small businesses reduce the risk, but it may also be used by public authorities as a tool for achieving greater business transparency.

Suggested Citation

  • Erika Besusparienė & Vesa A. Niskanen, 2023. "Fuzzy Model for Detection of Fraudulent Financial Statements: A Case Study of Lithuanian Micro and Small Enterprises," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 9(2), pages 165-185.
    • Handle: RePEc:men:journl:v:9:y:2023:i:2:p:165-185
    DOI: 10.11118/ejobsat.2023.008
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    References listed on IDEAS

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    1. Venelin Georgiev & Reni Petrova, 2020. "Testing the usefulness and predictive power of the adapted Altman Z-score model for Bulgarian public companies," Economics and computer science, Publishing house "Knowledge and business" Varna, issue 1, pages 19-28.
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      More about this item

      Keywords

      accounting; financial statement; fraud; fuzzy;
      All these keywords.

      JEL classification:

      • G3 - Financial Economics - - Corporate Finance and Governance
      • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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