Table 1 Research variables and definitions
From: Detection of fraudulent financial statements using the hybrid data mining approach
Variables | No. | Variable description | Definition/formula (the year before the year of fraud) |
|---|---|---|---|
Financial variables | X 1 | Accounts receivable ratio | Accounts receivable ÷ total assets |
X 2 | Current assets ratio | Current assets ÷ total assets | |
X 3 | Fixed assets ratio | Fixed assets ÷ total assets | |
X 4 | Operating income to total assets | Operating income ÷ total assets | |
X 5 | Net income to total assets | Net income ÷ total assets | |
X 6 | Net income to fixed assets | Net income ÷ fixed assets | |
X 7 | The proportion of cash against total assets | Cash ÷ total assets | |
X 8 | Natural logarithm of total assets | ln total assets | |
X 9 | Natural logarithm of total liabilities | ln total liabilities | |
X 10 | Gross profit ratio | Gross profit ÷ net sales | |
X 11 | Operating expenses ratio | Operating expenses ÷ net sales | |
X 12 | Debt ratio | Total liabilities ÷ total assets | |
X 13 | Current ratio | Current assets ÷ current liabilities | |
X 14 | Quick ratio | Quick assets ÷ current liabilities | |
X 15 | Inventory turnover | Cost of goods sold ÷ average inventory | |
X 16 | Cash flow ratio | Operating cash flow ÷ current liabilities | |
X 17 | Pre-tax profit ratio | Pre-tax profit ÷ net sales | |
X 18 | Accounts receivable turnover | Net sales ÷ average accounts receivable | |
X 19 | Sales growth rate | (Current year’s sales − last year’s sales) ÷ last year’s sales | |
X 20 | Debt-to-equity ratio | Total liabilities ÷ total equity | |
X 21 | Returns on assets before tax, interest, and depreciation | Income before tax, interest and depreciation ÷ average total assets | |
X 22 | The ratio of current liabilities against total assets | Current liabilities ÷ total assets | |
X 23 | Total asset turnover | Net sales ÷ average total assets | |
Non-financial variables | X 24 | The major stockholders’ stockholding ratio | Number of stocks held by the major shareholders ÷ total number of common stocks outstanding |
X 25 | Duality of board director and CEO | If duality of board director and CEO existed, it is set as 1; otherwise, 0 | |
X 26 | Size of the board of directors | Number of directors | |
X 27 | The ratio of pledged stocks held by directors and supervisors | Number of pledged stocks held by directors and supervisors ÷ number of stocks held by directors and supervisors | |
X 28 | The ratio of stocks held by directors and supervisors | Number of stocks held by directors and supervisors ÷ total number of common stocks outstanding | |
X 29 | Audited by BIG4 (the big four CPA firms) | 1 for companies audited by BIG4, otherwise, it is 0 | |
X 30 | Number of outside supervisors | Number of outside supervisors |