Page 21 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.82, # 1, 2025, pp. 19-35

One of the ways to enhance audit quality, particularly in terms of reducing the risks of
undetected fraud, is to develop analytical procedures that incorporate modern tools for
preliminary risk analysis (Repousis, 2016; Aqilah, Mohammed and Kamaluddin, 2021).
These tools enable auditors to efficiently identify companies exhibiting potential
indicators of fraud by focusing on key financial metrics. Among the most common
models for assessing the reliability of financial statements are the Beneish and Roxas
models, which are cost-effective, relatively easy to implement and can support auditors
in detecting manipulations and falsifications in corporate financial reporting (Goleс,
2019; Lehenchuk et al., 2022).
Despite the ongoing martial law in Ukraine, entrepreneurial activity continues, but it
acquires new organizational and legal forms, alternative financial sources, diversified
risk management strategies, and innovative approaches to work organization.
Marketing companies play a crucial role in the functioning of the Ukraine’s economic
system, acting as intermediaries between producers and consumers, shaping demand
for goods and services, and supporting the effective operation of market mechanisms.
Their activities contribute to the development of competition, the innovative renewal
of the economy, and the enhancement of product and service quality.
Marketing companies possess specific characteristics that increase their vulnerability
to financial fraud risks. These include creation of intangible assets and intellectual
property, a complex asset structure with a significant proportion of goodwill and
accounts receivable, as well as revenue recognition practices related to services
rendered over extended periods. These factors create the prerequisites for the
manipulation of financial statements and require increased attention from auditors
when assessing risks. Therefore, systematic monitoring of the financial statements of
marketing companies using analytical procedures will contribute to increasing the
transparency and reliability of financial indicators for investors and creditors.

LITERATURE REVIEW
The first attempts to improve audit methodology through the application of analytical
procedures emerged in the late 1990s. In particular, Beneish (1999) developed a
quantitative model (Beneish M-Score), which enabled the detection of financial
statement manipulation based on the analysis of key financial ratios. Afterwards
Roxas (2011), who reduced the number of variables, thereby improving its accuracy
when applied to smaller companies, refined this model. In addition, researchers have
also developed a number of other similar regression models, such as Montier C Score
(2009), Dechow F Score (2011), Pustylnick P-Score (2011), which are commonly
used to identify hidden or atypical patterns that may signal the potential for financial
statement fraud.

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