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Article by listed accountant Annja Louca

  1. Unusually high revenues and low expenses when there isn’t a reason - for example, seasonal or compared to the industry or type of industry that the entity is in

  2. Growth in inventory or debtors that doesn’t match growth in sales or cash flows

  3. Improper capitalisation of expenses in excess of what are considered to be industry norms or reasonable

  4. A very high repairs and maintenance expense in the income statement

  5. Profit margins showing but no tax expense accounted for in the financial statements

  6. Turnover that are positive and growing but operating cash flow that appears to be going down

  7. Loans to executives or other parties that appear to be written off

  8. Gross margin or operating margins out of line with practice, previous periods or excessively low

  9. Fairly excessive use of off-balance sheet entities based on relationships that aren’t standard within the industry

  10. Unusual increases in the book value of assets. This can include stock and trade debtors

  11. Deliberately complex or lack of disclosure notes that make it impossible to fully determine the nature of a transaction

  12. Prior year balances that do not agree with previous financials

  13. Balances that do not agree with third party confirmation letters or statements i.e. bank statements

    See blog post