Are the score ratios conclusive in detecting Financial Fraud? The case of Clínica Las Condes in Chile

Jou nal o Legal, E hical and Regula o y Issues Volume 24, Special Issue 1 2021 1 Business E hics and Regula o y Compliance 1544-0044-24-S1-300 ARE THE SCORE RATIOS CONCLUSIVE IN DETECTING FINANCIAL FRAUD? THE CASE OF CLÍNICA LAS CONDES IN CHILE Albe o Cla e ía Na a e e, Se illa Uni e si y Amalia Ca asco Gallego, Se illa Uni e si y Pablo Mo eno Padilla, EGEM School o Business Managemen ABSTRACT This esea ch aims o es he e ec i eness o ce ain a ios & inancial models equen ly used in he li e a u e as ools o de ec accoun ing manipula ion, h ough he case o Clínica Las Condes in Chile. The pe iod o accoun ing e o s 2008 -2019 was analyzed. Si ua ions such as he s ong ejec ion o a o ensic audi o de e mine he eal cause o he p oblem suppo he in e es in using inancial analysis ools o know i s heal h. Howe e , he indica o s used ail o classi y he case as one o inancial aud, bu a he as accoun ing "i egula i ies". Despi e he ac ha he company is awai ing a sen ence ha will allow i o close he case, which has gene a ed economic, legal, social and epu a ional cos s. The s udy leads o pos ula e ha inancial a ios alone a e no a su icien ool o de ec manipula ion in inancial s a emen s. A holis ic analysis o he p oblem is equi ed, using a ious me hodologies, such as he use o da a mining models o help p e en and de ec inancial auds in ime, which ha e nega i e consequences o manage s, sha eholde s, in es o s and o he agen s o he economy. Keywo ds: Financial F aud, Accoun ing Manipula ion, F aud De ec ion, Beneish M - Sco e, Al man Z - Sco e, Sloan Ra io INTRODUCTION In ecen yea s, news ela ed o inancial auds ha e been inc easing (Meh a & Bha ani, 2017), occu ing in a ious ypes o indus ies, d awing s ong public a en ion & causing g ea impac on di e en economic sec o s (Ngai e al., 2010; Hawa e al., 2014). The conce n encompassed by hese malp ac ices lies in he ha m ul impac owa ds he economy & business: alling sha e p ices, educed p oduc i i y, bank up cy o companies & loss o money o di e en agen s, leading o poo capi al alloca ion & lack o c edibili y in he capi al ma ke (Kuma i Tiwa i & Debna h, 2017; Th ockmo on e al., 2015; Ngai e al., 2010; Albash awi, 2016). Al hough he e a e ce ain di e ences among au ho s, he de ini ion o inancial s a emen aud is unde s ood as " he in en ional, delibe a e miss a emen o omission o ma e ial ac s o accoun ing da a ha a e misleading and, when conside ed wi h all a ailable in o ma ion, would cause he eade o change o al e his o he judgmen " (ACFE, 1993). Mo e in ui i ely, i consis s o he in en ional alsi ica ion o inancial s a emen s by o e s a ing e enues, asse s o ea nings (Tho nhill & Wells, 1993) o unde s a ing liabili ies, losses o expenses (Spa his, 2002; Hawa e al., 2014). Being such a de imen al ac o business and capi al ma ke s, di e en agen s such as in es o s, egula o s and he inancial communi y ha e emphasized on p e en ing and de ec ing his ype o c ime (Rezaee, 2005; Nasi e al., 2019; Zhu & Gao, 2011). Jou nal o Legal, E hical and Regula o y Issues Volume 24, Special Issue 1 2021 2 Business E hics and Regula o y Compliance 1544-0044-24-S1-300 Based on he Associa ion o Ce i ied F aud Examine s (ACFE, 2018), he main ypes o occupa ional aud a e co up ion, inancial s a emen aud & asse misapp op ia ion. Acco ding o he same s udy, made up o 2.690 aud cases in mo e han 120 coun ies, inancial s a emen aud is he leas common and he one ha p oduces he highes cos s, gene a ing losses on a e age o USD 800.000. Emblema ic cases such as En on Co po a ion, Xe ox and Pa mala s and ou among his ype o aud. The o ganiza ion T anspa ency In e na ional has been publishing since 1995 he co up ion pe cep ion index, which measu es on a scale om 0 ( e y co up ) o 100 (absence o co up ion) he le els o co up ion in 180 coun ies. Fo 2019, La in Ame ican coun ies such as U uguay o Chile ha e been wo sening hei index o e he las 7 yea s, placing hem a behind coun ies such as Denma k, New Zealand o Finland (T anspa ency In e na ional, 2019). In Chile, mul iple cases o inancial aud ha e been unco e ed, a ec ing bo h p i a e & public sec o companies (Lei a & Mellado, 2014). The Pen a & SQM cases s and ou among he mos scandalous cases linked o co up ion; he La Pola case, associa ed wi h aud in he inancial s a emen s, which nega i ely a ec ed cus ome s, in es o s & he s ock ma ke (Pa isi e al., 2015); he " aud in Ca abine os" case in 2016 -which is cu en ly s ill unde in es iga ion-, whe e high- anking o ice s o he same ins i u ion a e in ol ed, who we e con ic ed o asse misapp op ia ion c imes (La Te ce a, 2019). In 2017, i was epo ed ha Clínica Las Condes (CLC) was d agging accoun ing e o s since 2008, a ac ha was de ec ed exclusi ely by he ans e o inancial accoun ing in o ma ion o he new adminis a i e pla o m o he company, known as SAP sys em. CLC disclosed an accoun ing di e ence o app oxima ely USD 10 million, leading i o hi e he consul ing i m PwC o conduc an audi o he i m o cla i y his accoun ing p oblem (Na a e e, 2020). Al hough he case is s ill in he hands o he Chilean jus ice sys em & i has no ye been de e mined whe he he e was aud in he inancial s a emen s, he e is a ce ain p obabili y ha his c ime has been commi ed. Gi en he abo e, his esea ch p oposes o es he e ec i eness o ce ain inancial a ios & models - namely, Al man Z-sco e, Beneish M-sco e & Sloan Ra io - equen ly used in he li e a u e as a ool o de ec manipula ion in inancial s a emen s, h ough he case o CLC, ying o answe he ollowing ques ions: A e he sco e a ios conclusi e, by hemsel es do hey allow adical decisions o be made, and could i be asse ed wi h he applica ion o he selec ed sco e a ios ha inancial aud has been commi ed in he case o CLC? In ela ion o he abo e, he esea ch was s uc u ed as ollows: Sec ion 2 shows he li e a u e e iew ela ed o a ios and inancial models, alida ed by di e en au ho s in he li e a u e as use ul ools o de ec and p e en aud in inancial s a emen s. Sec ion 3 p esen s he empi ical analysis ha includes he esea ch me hod and in o ma ion and e idence associa ed wi h he CLC case. Sec ion 4 p esen s he esul s and hei discussion. Finally, Sec ion 5 con ains he conclusion o he pape . LITERATURE REVIEW To cope wi h he la ge numbe o aud cases ha occu oday, he de ec ion o aud in inancial s a emen s has become a key ac o a oid he nega i e consequences ha i can gene a e (Ngai e al., 2010), mo i a ing o in es iga e e ec i e me hodologies ha allow de ec ion a an ea ly s age (Hawa e al., 2014). In his line, he a ea o da a mining has con ibu ed wi h impo an echniques and me hods ha acili a e he de ec ion o inancial aud (see Wes & Bha acha ya, 2016; Phua e al., 2005; Ko sian is e al., 2006; Fanning & Cogge , 1998). In u n, inancial esea che s and p ac i ione s ecommend he simul aneous use o ce ain a ios and models as e ec i e ools o de ec aud in inancial s a emen s (Meh a & Bha ani, 2017; Bai e al., 2008). Based on he abo e, he s udy p oposes 3 models ha a e used o de ec manipula ion in inancial s a emen s. These a e he Beneish M - sco e and Al man Z - sco e models, which a e widely used in he li e a u e, and he Sloan a io, which akes in o conside a ion he company's cash low. Jou nal o Legal, E hical and Regula o y Issues Volume 24, Special Issue 1 2021 3 Business E hics and Regula o y Compliance 1544-0044-24-S1-300 Al man Model Z - sco e Al man (1968) implemen ed a mul iple disc iminan analysis model, which allows p edic ing whe he he analyzed company will de aul o no . Acco ding o Al man (1968), he model consis s o i e a iables ha a e cons uc ed based on inancial s a emen s and s ock ma ke in o ma ion (Al man e al., 2019). I co ec ly p edic s he inancial ailu e o 95% o companies one yea be o e hei bank up cy and dec eases o 72% accu acy when measu ed wo yea s be o e bank up cy (Meh a & Ba ani, 2017; Al man, 1968). Fo hese easons, he Al man Z - sco e model is pionee ing and among he mos widely used in he li e a u e o de ec he possibili y o co po a e insol ency. Al hough he Al man Z-sco e model is used o de ec he possibili y o bank up cy, bu no aud, he e is li e a u e ha suppo s a ai ly close ela ionship be ween bo h si ua ions. C essey (1953) es ablishes he F aud T iangle, a model ha con empla es h ee common cha ac e is ics. Fi s , he e is an oppo uni y o incen i e o commi aud. Nex , he e is a inancial p essu e o need pe cei ed by he auds e . Finally, whoe e commi s he aud a ionalizes ha hei pe sonal e hical codes a e consis en wi h hei audulen ac (Kamal e al., 2016). Along hese lines, Deloi e Fo ensic Cen e (2008) posi s ha he e is a ela ionship be ween bank up companies and inancial aud, and ha bank up companies a e h ee imes mo e likely o be in ol ed in inancial s a emen aud han non-bank up companies. Se e al au ho s ha e used he Al man Z-sco e model o es i s use ulness in pa icula cases. Meh a & Ba ani (2017) analyze he e ec i eness o he model o he Toshiba case, concluding ha i is use ul o de ec ing co po a e aud. MacCa hy (2017); O o i (2016) analyze he model o he case o En on Co po a ion, de ec ing high p obabili y o de aul o he yea 1997. Pa isi, e al., (2015) analyze he case o he Chilean company La Pola , whe e he Al man model shows ha he company is on he e ge o inancial collapse in he yea 2011. eaching a CCC+ isk a ing. Ala eeni & B anson (2013) es he model o a sample o 142 companies in Jo dan, de e mining ha he Z - sco e wo ks co ec ly o de e mine companies ha all in o de aul . Yi (2012) analyzed he e iciency o he model o 40 companies lis ed in China, concluding ha he model is app op ia e o ea ly wa ning o inancial ailu e de ec ion, eaching an accu acy close o 90%. Al hough he Al man Z - sco e model is among he mos widely used in he li e a u e due o i s ease o applica ion, i has been c i icized o no including company cash low in o ma ion and no including mo e inancial a ios in i s o mula ion (Meh a & Ba ani, 2017). Unde his concep , he es allows o know whe he his Sco e a io is conclusi e and whe he i deli e s indica ions o aud in he case o CLC. Beneish Model M – sco e Beneish (1997, 1999) de eloped a model ha allows he de ec ion o companies ha manipula e hei ea nings in inancial s a emen s, h ough a sco e ha is ob ained om he elabo a ion o a iables ha can be cons uc ed using he in o ma ion epo ed in hei own inancial s a emen s. By using an unweigh ed p obi , he Beneish M - sco e model allows de ec ing app oxima ely hal o he companies ha engage in manipula ion p io o public disco e y. Thus, he model can be a use ul ool o classi y and de ec manipula i e companies (P ice e al., 2011; Beneish, 1997). The model classi ies manipula i e i ms wi h 58% o 76% e iciency, while he pe cen age o non-manipula i e i ms inco ec ly classi ied anges om 7.6% o 17.5% (Beneish, 1999). Se e al au ho s ha e es ed he e iciency o his indica o . MacCa hy (2017); Mun a i (2015) use he model o he case o En on Co po a ion, de ec ing manipula ion in i s ea nings o he yea 1997. Oma , e al., (2014) applied he model o he company MMHB, inding ha i had eco ded ic i ious e enues, hus alida ing he e ec i eness o he model o de ec aud. Rami ez, e al., (2017) analyze he case o Pescano a (Spanish business amily), inding ha Jou nal o Legal, E hical and Regula o y Issues Volume 24, Special Issue 1 2021 4 Business E hics and Regula o y Compliance 1544-0044-24-S1-300 Pescano a had engaged in aud and in agg essi e accoun ing p ac ices p io o disclosing i s inancial p oblems. Talab, e al., (2018) apply he model o a lis o 23 banks lis ed on he I aqi s ock exchange, inding ha 62% o he sample p esen accoun ing manipula ion in hei ea nings. Adu-Gyam i (2020) es ablishes ha he Beneish M - sco e model is use ul in p edic ing he incidence o ea nings manipula ion in Ghanaian lis ed companies. Howe e , no all e idence poin s o he Beneish M - sco e being e ec i e in all si ua ions. O o i (2016) analyzes he En on case, inding ha he model p esen ed laws in i s p edic ion, which can lead o e oneous conclusions. Ka ika i (2014) used he model o de ec aud in AngloGold Ashan i, which did no show signs o aud while he Al man Z - sco e model did wa n o inancial p oblems in he yea s s udied. Wi h his in o ma ion, he es allowed o know i his sco e a io is conclusi e and i i p o ides indica ions ha aud has been commi ed in he case o CLC. Sloan Ra io Sloan (1996) p oposed a inancial indica o ha allows calcula ing he pe cen age o acc uals wi h espec o a company's o al asse s. By analyzing s ock pe o mance, Sloan (1996) shows ha companies wi h high acc uals a ios ha e signi ican ly lowe e u ns han companies wi h low acc uals a ios. The eason o his is ha in es o s pay oo much a en ion o epo ed ea nings ha d i e sho - e m s ock e u ns. This pu s p essu e on managemen , which is d i en o gene a e ea nings esul s ha a e no sus ainable o e he long e m. In his way, posi i e s ock e u ns can be gene a ed in he sho e m, howe e , when u u e ea nings a e lowe han expec ed, he s ock p ice will co ec o nega i e pe o mance in he long e m. The a io p oposed by Ama (2017), based on Sloan (1996), is as ollows: ( 1) Wha eme ges is ha , when he a io has a alue highe han 10%, i deli e s a wa ning ega ding possible accoun ing manipula ions. The eason is ha i e lec s a high amoun o di e ences be ween wha has been acc ued and wha has a ec ed he cash (Ama , 2017). Al hough empi ically he use o his indica o has no been gene alized, Ama (2017) p oposes i s use, since i employs in o ma ion ha he o he 2 a ios do no conside , in his case, he company's cash low. This is he eason o check whe he his Sco e a io is conclusi e and whe he i p o ides e idence ha aud has been commi ed in he case o CLC. EMPIRICAL ANALYSIS Resea ch Me hodology This wo k is based on he case s udy, allowing con as ing da a wi h a heo e ical amewo k acco ding o he p oblem, o analyze and in e p e he in o ma ion collec ed (He nández Sampie i e al., 2014; Yin, 1994). I con ains a line o esea ch o mixed o de and a documen a y design suppo ed by in o ma ion om seconda y sou ces. The case s udied will be CLC, whe e he pe iod whe e e o s a e p esen ed in he inancial s a emen s was analyzed, ha is, om 2008 o 2019. The in o ma ion used o analyze he case was: (a) Income S a emen , (b) S a emen o Financial Posi ion and (c) Cash Flow S a emen , which was ex ac ed om CLC's annual epo s and consolida ed inancial s a emen s, ob ained om i s websi e (da ed Oc obe 13, 2020) and om Thompson Reu e s, duly audi ed by di e en companies (Deloi e, EY & PwC). Case Backg ound: CLC Jou nal o Legal, E hical and Regula o y Issues Volume 24, Special Issue 1 2021 5 Business E hics and Regula o y Compliance 1544-0044-24-S1-300 CLC was ounded in 1978, b inging oge he enowned physicians-academics in hei special ies, o o m a hospi al o excellence, wi h a s ong oca ion o angua d and inno a ion (CLC, 2011). In June 1979, Clínica Las Condes S.A. was es ablished. A p esen , CLC has 5 si es, o e ing di e en special ies in each clinical cen e . The heal h indus y in Chile is composed o a mixed sys em, inanced mainly by public and p i a e con ibu ions. The public componen has 78% co e age, while he p i a e sec o accoun s o 20% (CLC, 2019). Se ice deli e y is ca ied ou by public and p i a e p o ide s, and CLC compe es in he la e sec o . CLC is one o he mos p es igious and excellen p i a e heal hca e acili ies in Chile. Among he clinics ha show hei balance shee s, CLC is he one ha has he highes e enues om sales, wi h amoun s o a ound $226,000 million, su passing o he majo compe i o s in he sec o , such as Clínica San a Ma ía and Clínica Dá ila (La Te ce a, 2020). Howe e , i has one o he lowes p o i s among i s compe i o s, eaching an app oxima e amoun o ThCh$ 4,500.000. being widely su passed by Clínica San a Ma ía (ThCh$ 16,232.911) and Clínica Indisa (ThCh$ 11.629,751). FIGURE 1 TOP RESULTS BY COMPETITORS IN THE INDUSTRY, 2019 Sou ce: Own elabo a ion based on inancial s a emen s o clinics. Howe e , ce ain accoun ing e o s ha ha e d agged on o many yea s esul ed in lawsui s and legal p oblems ha a e s ill unde discussion, which will be desc ibed below. In Janua y 2017, he gene al manage o CLC sends an essen ial ac o he Supe in endency o Secu i ies and Insu ance (SVS), no i ying ha since No embe 2015 he i m has implemen ed a new adminis a i e pla o m, which suppo s he essen ial p ocesses o he company, including he inancial accoun ing p ocess known as SAP sys em. Due o he mig a ion o inancial in o ma ion o his en e p ise esou ce planning so wa e, i was possible o de ec ca y- o wa d di e ences in he company's accoun ing, which came om 2008, o an amoun close o $10.000 million (Pode Judicial, 2018). In esponse o hese ac s, he company's boa d o di ec o s decided o hi e he audi i m PwC o accu a ely de e mine he di e ences, o igin and impac on he company's inancial s a emen s (Pode Judicial, 2018). Du ing he cou se o 2018, s ong disc epancies a ose be ween di ec o s and majo i y sha eholde s o he company. In Ap il 2018, he new boa d o di ec o s akes o ice, whe e he possibili y o conduc ing a o ensic audi o de e mine he p oblema ic aspec s ha had been gene a ed in he company's accoun ing was aised (Pode Judicial, 2018). Immedia ely, his possibili y is ejec ed by he di ec o s and gene al manage o CLC. On Augus 1. 2018, a sha eholde s' mee ing is eques ed o discuss, again, he pe o mance o a o ensic audi . Wi hin days, he di ec o and p esiden o he company ejec ed his eques . On Augus 30. 2018, a second eques o a sha eholde s' mee ing is made, whe e i Jou nal o Legal, E hical and Regula o y Issues Volume 24, Special Issue 1 2021 6 Business E hics and Regula o y Compliance 1544-0044-24-S1-300 is p oposed o discuss he pe o mance o a o ensic audi and he o al e oca ion o he boa d o di ec o s (Pode Judicial, 2018). Wi h 5 o es in a o and 4 agains , he eques was again ejec ed, which mean a ep imand om he Financial Ma ke Commission. Subsequen o he sha eholde s' mee ing held in Oc obe 2018, he chai man o he boa d o di ec o s exp essed his lack o in e es in "digging in o he pas ", jus i ying and e e ing o he non-pe o mance o a o ensic audi o disco e he eal causes o he company's accoun ing p oblems. This gene a ed ha , in No embe 2018, a pa o sha eholde s made a eques o he appoin men o an a bi a o o he 12 h Ci il Cou o San iago, o esol e he di e ences be ween di ec o s, boa d o di ec o s, manage s and sha eholde s (Pode Judicial, 2018). Days la e , he opposing pa y iled an appeal o he decision aken by he Cou , which implied ha in he e en ha he decision was main ained, he case would go o he Cou o Appeals o San iago. In Feb ua y 2019, he Cou o de ed he appoin men o an a bi a o o se le he con lic , making e ec i e he appeal o he opposing pa y, so he case was ele a ed o he Cou o Appeals o San iago. Cu en ly, he case is s ill being s udied and analyzed by he Chilean judicial sys em, wi hou ha ing a esolu ion ega ding he accoun ing e o s p esen ed by CLC om 2008 onwa ds. Table 1 p esen s he ch onological o de o he e en s highligh ed in he case, wi h a b ie desc ip ion o he case. Table 1 CHRONOLOGICAL ORDER OF THE CLC CASE Da e Desc ipción o The E en 2008 Beginning o he accoun ing e o s o he company, which will be de ec ed in 2017. No embe 2015 T ans e o inancial accoun ing in o ma ion o he new adminis a i e pla o m: SAP sys em. Janua y 2017 Gene al Manage sends documen o he SVS no i ying accoun ing e o s since 2008, o $10.000 million. PwC audi i m is hi ed o de e mine accoun ing di e ences in he inancial s a emen s. Ap il 2018 New boa d o di ec o s akes o ice. A o ensic audi is p oposed, which is immedia ely ejec ed. S ong disag eemen s be ween di ec o s and majo i y in es o s, accusing ew ac ions o esol e and cla i y he accoun ing e o s. Augus 1. 2018 A sha eholde s' mee ing is eques ed o discuss he possible pe o mance o a o ensic audi . The p esiden and di ec o o he company ejec his eques . Augus 30. 2018 A sha eholde s' mee ing is again eques ed o add ess he issue o a o ensic audi and he o al e oca ion o he boa d o di ec o s. This eques is again ejec ed by he boa d o di ec o s. Oc obe 2018 Holding o a sha eholde s' mee ing. The p esiden o he company indica es his lack o in e es in in es iga ing he si ua ions ha caused he accoun ing diso de o he company. No embe 2018 Appoin men o an a bi a o judge by he 12 h Ci il Cou o San iago o se le he con lic . Coun e pa y iles an appeal o his designa ion, eques ing ha he case be ele a ed o he San iago Cou o Appeals. Feb ua y 2019 The case is ele a ed o second ins ance, aken by he Cou o Appeals o San iago. Sou ce: Own elabo a ion based on Pode Judicial (2018). Jou nal o Legal, E hical and Regula o y Issues Volume 24, Special Issue 1 2021 7 Business E hics and Regula o y Compliance 1544-0044-24-S1-300 Based on he in o ma ion ga he ed, i can be no ed ha he CLC case has led he company o be in he spo ligh o in es o s, sha eholde s, di ec o s and egula o y ins i u ions, awai ing a uling ha will allow closing he case, which has gene a ed economic, legal and epu a ional cos s. When hese possible i egula i ies we e de ec ed, CLC's managemen showed a willingness o cla i y he o igin o he si ua ion; a willingness ha , as he mon hs wen by, diminished o he poin o gene a ing legal con lic s be ween adminis a o s ha s ill pe sis in cou . Si ua ions such as he s ong ejec ion o a o ensic audi o de e mine he eal cause o he p oblems, and s a emen s by he company's p esiden exp essing his disin e es in in es iga ing he pas , suppo he in e es in using da a analysis ools in he inancial s a emen s o gain addi ional insigh in o he inancial heal h o he company, wi hou o ge ing ha he case is in he hands o he Chilean jus ice sys em and ha , a p esen , no sen ence has been handed down. Si ua ions such as he s ong ejec ion o a o ensic audi o de e mine he eal cause o he p oblems, and s a emen s by he company's p esiden exp essing his disin e es in in es iga ing he pas , suppo he in e es in using da a analysis ools in he inancial s a emen s o gain addi ional insigh in o he inancial heal h o he company, wi hou o ge ing ha he case is in he hands o he Chilean jus ice sys em and ha , a p esen , no sen ence has been handed down. RESULTS The analysis pe o med on CLC - h ough he in o ma ion p esen ed in i s inancial s a emen s - wi h he Al man Z-sco e model p o ides an o e iew o he company's inancial pe o mance. In pa icula , o de e mine CLC's isk o bank up cy du ing he pe iod analyzed, aking in o conside a ion ha companies a isk o bank up cy a e mo e likely o commi aud in hei inancial s a emen s (C essey, 1953; Deloi e Fo ensic Cen e , 2008). The esul s a e p esen ed in Table 2. while Figu e 2 shows he e olu ion o he indica o in he pe iod s udied. Table 2 ALTMAN Z MODEL - CLC SCORE 2019 2018 2017 2016 2015 2014 0.198 0.176 0.042 0.139 0.136 0.140 0.142 0.133 0.156 0.195 0.257 0.264 0.043 0.048 -0.015 0.027 0.058 0.062 0.983 1.145 1.146 1.382 1.951 2.288 0.539 0.522 0.484 0.522 0.541 0.505 Z - sco e 1.705 1.765 1.390 1.881 2.425 2.619 2013 2012 2011 2010 2009 2008 0.229 0.211 0.226 0.244 0.207 0.225 0.294 0.319 0.304 0.284 0.256 0.242 0.092 0.108 0.110 0.107 0.087 0.081 3.532 5.576 6.434 6.410 4.086 3.907 0.531 0.602 0.598 0.596 0.584 0.552 Z - sco e 3.639 5.007 5.517 5.486 3.931 3.771 Sou ce: P epa ed by he Company based on CLC's inancial s a emen s. Jou nal o Legal, E hical and Regula o y Issues Volume 24, Special Issue 1 2021 8 Business E hics and Regula o y Compliance 1544-0044-24-S1-300 FIGURE 2 ALTMAN Z MODEL - CLC SCORE Sou ce: P epa ed by he Company based on CLC's inancial s a emen s. Table 3 COMPARISON BETWEEN MANIPULATOR AND NON- MANIPULATOR FIRM VARIABLES WITH THE AVERAGE CLC Va iable Manipula o s Non-manipula i e A e age CLC DSRI 1.465 1.031 1.019 GMI 1.193 1.014 1.029 AQI 1.254 1.039 1.028 SGI 1.607 1.134 1.107 DEPI 1.077 1.001 1.017 SGAI 1.041 1.054 1.033 LVGI 1.111 1.037 1.106 Acc uals 1 0.031 0.018 0.049 Sou ce: Own elabo a ion based on Beneish (1999) esul s and CLC inancial s a emen s. FIGURE 1 BENEISH M MODEL - CLC SCORE Sou ce: P epa ed by he Company based on CLC's inancial s a emen s. Jou nal o Legal, E hical and Regula o y Issues Volume 24, Special Issue 1 2021 9 Business E hics and Regula o y Compliance 1544-0044-24-S1-300 Table 4 p esen s he esul s ob ained using he Sloan a io o he CLC ime pe iod unde s udy. I s beha io can be seen g aphically in Figu e 4. Table 4 SLOAN RATIO OF CLC 2019 2018 2017 2016 2015 2014 Ne income $17.863 $20.177 -$6.214 $10.199 $19.113 $19.191 CFO $20.066 $16.241 $22.660 -$7.191 $428 $22.725 To al Asse s $419.431 $419.936 $402.608 $376.283 $332.006 $309.946 Sloan a io -0.53% 0.94% -7,17% 4,62% 5,63% -1.14% 2013 2012 2011 2010 2009 2008 Ne income $24.005 $22.936 $21.236 $19.220 $14.698 $16.546 CFO $20.125 $24.439 $27.925 $20.235 $17.766 $11.987 To al Asse s $261.476 $211.413 $193.858 $179.356 $168.322 $159.064 Sloan a io 1.48% -0.71% -3,45% -0.57% -1.82% 2.87% Sou ce: P epa ed by he Company based on CLC's inancial s a emen s. FIGURE 4 SLOAN RATIO OF CLC Sou ce: P epa ed by he Company based on CLC's inancial s a emen s DISCUSSION OF RESULTS Resul s Z – Sco e G aphically, Figu e 2 shows he e olu ion o he Z - sco e indica o o e ime. These esul s e eal ha CLC wen h ough he 3 zones: om 2008 o 2013 in he sa e zone (Z - sco e abo e 2.67), 2014 o 2016 h ough he g ay zone (Z - sco e be ween 2.67 and 1.81) and ending in he dange zone, om 2017 o 2019. Table 5 shows he alue o he a iables and Z - sco e om he da a collec ed om he inancial s a emen s, om 2008 o 2019. Speci ically, in 2017 CLC p esen s de e io a ion o he Z - sco e. This si ua ion is due o he wo sening o he a iables o he model, highligh ing 2 o hese. CLC's Z-sco e, which dec eased by 69.6% compa ed o 2016, ale ing abou liquidi y p oblems; and , which dec eased by 156.9% wi h espec o he same yea , indica ing a e y low p oduc i i y o he company's asse s. I ollows ha CLC's inancial heal h wo sened be ween 2017 and 2019, wi h alues o 1.390. 1.765 and 1.705, which could d aw a en ion and ale manage s, o e e se he poo pe o mance ha he company has p esen ed.