5 Forensic Indicators to Detect Financial Misrepresentation or Mismanagement
1) Percentage of miscellaneous expenses as a proportion to total revenue
2) Change in Reserves unexplained by Profit/Loss for the year and Dividends
3) Provision for Doubtful Debt as a proportion of Debtors outstanding for over 6 months
4) Growth in Auditors’ Remuneration vis-a-vis growth in revenues
5) Change in method of calculting depreciation
Bonus Tips
6) Trend in Ratio of Capital Work in Progress to Gross Block
7) Contingent Liabilities as a Percentage of Total Net Worth
8) Volatility in non-operating incomes such as Yield earned on Cash & Cash Equivalents
