Quick Finance Tip - Accounting Games and Potential Evidence

The following are lookouts to keep an eye for, in relation to, accounting games and their potential evidence:

• Aggressive revenue recognition, Improper Expense Recognition
• Operating Cash Flow not aligning with earnings
• Revenue Growth, Gross and Net Margin Growth not syncing with industry or receivables growth
• Increasing Days of Inventory, while seeing continued sales growth
• Classification of nonrecurring income as revenue
• Deferring Expenses
• Excessive use of operating leases
• Excessive classification of expenses or losses as extraordinary
• Uses of long useful lives for depreciation/amortization
• Aggressive pension plan assumptions
• Recurring “fourth-quarter surplus”
• Continued use of other “off-balance sheet” financing