Financial statements are the core information resource for any organization that trades
publicly. Publicly traded organizations are listed under any country
s Securities and

Exchange Commission. According to agency theory, firms are directed by a management
body, and the company
s owner selects these groups of people. Management people are
responsible for preparing the financial report of any firm, screening its operating
performance and proficiency. With the help of this disclosed information, investors,
creditors and other related parties decide that firm. Therefore, the steadfastness of those
reports depends on their clarity and exactness. Moreover, the capital market uses the
s disclosed information to place the price for the listed security, and the users rely
on them to establish their decision regarding that firm.
It should be noted that managers occasionally intentionally exploit the financial report to
pressure some market competitors. The intentional manner of a manager to manipulate the
financial figure is known as earnings management. Nonetheless, in 2014, 40 US public companies
reported profitable conditions using creative accounting techniques while in a loss position under
traditional accounting methods (
Bhasin, 2016). Top management of any firm discloses falsified
and misleading financial information to hide the company
s actual scenario or financial position.
The mindset of unprincipled management people is the main cause of increasing corporate
accruals, not the business cycle (
Hasan, Rahman, & Hossain, 2014; Hasan, Omar, Rahman, &
Hossain, 2016
). Users, especially the investorsgroups, are defenseless due to this falsification of
accounting data. The authentication of accounting systems and the dependence on disclosed
reports for creating management and investment decisions are being questioned as the recent list
of failed economic and business enterprises is not too short. A few such cases are the
disintegration of Enron, WorldCom, Robert Maxwell Pension Funds and the downfall of Arthur
Anderson, the
Big Fiveaccounting firm belonging to the Big Fiveabove stated issue.
Undoubtedly, these issues have proved that the financial report prepared by the administration
of a firm and specialized by the external auditors could not bring the actual picture of a company.
Decisions made following those reports became fraudulent and destroyed the belief of
stakeholders. The management body misleads the firm
s owners and the organizations users by
adopting unethical steps through earning management. Transparency has become a vital issue
regarding the annual reports provided by the company. The authenticity of the financial reports
may endanger a company
s inflated profit and expertise-related information. Doing fraud is the
intentional decision of a firm
s topmanagement (CEO or CFO) to optimize their personal need and
uphold the company
s image towards the public. However, this is unethical.
Recent scams and financial fraud in Bangladesh
s banking sector have urged further
scrutinization of those financial institutions
operational details and financial solvency.
Hallmark Scam, Bismillah Textile Scandal and AnnonTex fraud have highlighted the
loopholes in the regulatory system of the financial institutions of Bangladesh. The process of
approving loan and advances are not clear and transparent. Consequently, there has been a
rise in the corporate indiscipline and accountability of the banking sector of Bangladesh.
Lack of good governance, the management
s bad intention and the regulatorsineffective
control mechanism are hurting the Bangladeshi economy
s most sensitive and vital sector.
This also amplifies the opportunity to engage in fraudulent activity. Following the fraud
triangle theory, this study analyzes the management body
s opportunistic behavior. The
fraud triangle theory consists of three components: pressure, opportunity and rationalization.
The pressure of making wealth may transform a white-collar employee into a white-collar
criminal, as most white-collar crimes are committed by formerly good people (
Ghosh, Sen, &
Riva, 2020
). This tendency to engage in fraudulent activity is materialized when they get a
good opportunity. Such kind of opportunity arises in the company due to poor governance,
ineffective internal control mechanism and immoral attitude of the management. Fraudsters
usually complete their plan by giving loans and advances based on personal connections,
political affiliation and personal business interests. Finally, these persuaded investments are
reported as nonperforming loans (NPLs) in the financial statements and shown to
stakeholders as a loss arising from normal business operations. This can be termed as the

rationalization of the fraud triangle theory. The management of One Bank Limited, a listed
commercial bank, has manipulated the financial statements to overstate the profit without
complying with the regulatory requirements of keeping provisions for loans (
Alo, 2021). PK
Halder, former Managing Director of a bank and two other financial institutions, had been
found guilty of laundering 100 m taka from various financial institutions (
Daily Star, 2021).
These are the latest scandals that have taken in Bangladesh. The result of these unexpected
events hit the firm performance. Reportedly the growing level of scams and NPLs is
decreasing the banks
profitability. NPLs ratio is in increasing mood over the year for every
kind of bank, and according to theory, it is affecting the profit percentage of the banks in
Bangladesh negatively (
Financial Express, 2020). However, the profit percentage of listed
private commercial banks in Bangladesh is also growing, except in 2020 (due to the COVID-19
pandemic) (
Bangladesh Bank, 2022). Moreover, NPLs and profit margins do not stand in a
parallel way as they have negative assertions (
Financial Express, 2020). Farmers Bank was
established in 2013, and by the end of 2018, it showed NPLs of 58%. It disclosed a positive
profit margin with a high amount of NPLs (
Dhaka Tribune, 2019). The list of these loan
scams, defaults and increasing NPLs is not short in Bangladesh, and this will create the
problem of authenticity and transparency of disclosed information by this banking and other
financial institutions doing business here.
Ghosh et al. (2020) highlighted that lack of board
independence is one of the major causes of the poor performance of the financial institutions
in Bangladesh. As a result, the board of directors feels the pressure to manage earnings using
different techniques. Few cases come to the news of general investors, and others remain
behind the market scene about which general investors know nothing but put their
investment in the market. Recently, procedures like statistical models, financial ratios,
mathematical models and data mining have been used to find fraud in financial statements.
According to forensic accounting, this detection of fraud needs a long investigation process,
and the primary activity of this process should be uncovering fraud. A predictive diagnosis of
manipulation is needed to accelerate the fraud investigation procedure to find the fraud in
financial statements or discover the intention of fraud. Five types of patterns are mainly used
for the falsification of financial statements. These include fabricated revenues, inappropriate
timing schemes, understating liabilities, less disclosure and problematic asset valuation
procedures (
Hasan, Omar, Barnes, & Handley-Schachler, 2017). Investigating each stated
variable can be a good start for finding the distortion pattern in the financial statement. On
that note, Beneish
s M-score model (Beneish, 1999) combines eight ratios that act as a forensic
accounting tool for identifying fraud in the financial statement. This research aims to find out
the fraud of listed commercial banks in Bangladesh and analyze them in an organized manner
with the help of the Beneish M-score (
Beneish, 1999). To motivate the study, there are some
specific inquiries to construct a view of the present scenario of disclosing fraudulent
information in Bangladesh. These identify the number of listed banks in Bangladesh that
manipulate financial statements, find the specific pattern or criteria for fraud by the banks
and find the governing or leading ratios or variables mostly used in manipulation. From the
analysis, it can be said that the manipulating behavior of listed private commercial banks in
Bangladesh shows an unstable trend. This means those banks are not engaging themselves
with the same manipulating items to falsify their disclosed accounting information.
Moreover, interest income and balance with other financial institutions, an unusual growth in
intangible assets, accounting accruals and growth indicators are the main items for the
sampled banks to manipulate their accounting data.