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A mathematical model that uses financial ratios and eight variables to identify whether a company has manipulated its earnings. The variables are constructed from the data in the company's financial statements and, once calculated, create an M-Score to describe the degree to which the earnings have been manipulated.
1 A z-score greater than 0 represents an element greater than the mean. 2  A z-score equal to 0 represents an element equal to the mean. 3  A z-score equal to 1 represents an element that is 1 standard deviation greater than the mean; a z-score equal to 2, 2 standard deviations greater than the mean; etc.