Page 127 - Auditinf Electronic System

Fraud detection:

Calculate total Z score and if:

• DISTRESS ZONE (Z < 1.81): If the Altman Z Score is less than 1.81, then the
firm is said to be in ‘Distress Zone’ means the financial position of the
company is in a distress and that the company if likely to head towards
insolvency in the next two years and files for a bankruptcy.

• GREY ZONE (1.81 < Z < 2.99): If the Altman Z Score is between 1.81 and 2.99,
the firm is said to be in ‘Grey Zone’ which means it has a moderate probability
of bankruptcy in near future. It does not mean that firms lying in this range
have a weak financial stability but one needs to be cautious and be diligent of
the risks.

• SAFE ZONE (Z > 2.99): If the Altman Z Score is over 2.99, the firm is said to
be in the ‘Safe Zone’. Which means the company is has a strong financial
position and not headed towards bankruptcy in near future.

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‫جميع الحقوق محفوظة ـ الإعتداء على حق المؤلف بالنسخ أو الطباعة يعرض فاعله للمسائلة القانونية‬