Beneish Model Interpretation Question : Schweser

CFA Level II FRA
#1

Hi,

As I understand the M-Score in Beneish Model is supposed to be a standard normal Z score. So from the score we can find probability of earning manipulation.

But in the Schweser materials in the solution to the Beneish Model interpretation question the probability is given below.

M-score –1.53 , Probability 9.58%

But the probability for -1.53 is 6.30% (Z table right tail). What am I missing here ? Is it a typo or my understanding is wrong ? Any clarification is appreciated.

Regards

#2

Hi,

I’ve just come across this too.

Your understanding is correct. This appears to be a typo in the Schweser materials.

In the CFAI notes it states that “The probability… can be calculated by using the cumulative probabilities for the standard normal distribution or the NORMSDIST function in excel.”

Both of which give 6.3% for -1.53 M-Score.

Kind Regards