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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.
It is the standard score or z-score transformation. The standard score transformation is a linear transformation such that the transformed mean and standard deviation are 0 and 1 respectively. The selection of these values was somewhat arbitrary, but not without some reason.