Creative accounting may not be fraud, well, at least until it blows up. Outright fraud is difficult to detect. So the key assumption is that the books are at least reasonably reliable. If can't trust the management, just give it a miss, not worth the time and effort. :-)
If you read DBS latest results, the auditor only audited 5% of earnings as a sample size. It is impossible to audit the whole company for the financial year so we as investors and members of the company have to trust the managers or agents of the company.
Sudden increase in inventory/sales ratio: This indicates the company may be inflating assets such as inventories.
like that UMS liao, 1000% increase in inventories.
Anyway, thanks for this post. i save most of your post and read them again and again.
Reply to @GrandpaLemon : i want to also no one will take me seriously. doubt anyone go sell their ums after seeing my post.
Creative accounting may not be fraud, well, at least until it blows up. Outright fraud is difficult to detect. So the key assumption is that the books are at least reasonably reliable. If can't trust the management, just give it a miss, not worth the time and effort. :-)
If you read DBS latest results, the auditor only audited 5% of earnings as a sample size. It is impossible to audit the whole company for the financial year so we as investors and members of the company have to trust the managers or agents of the company.