Sniffing for Cooked Books

Excerpts via Fraud Magazine.

In this article, Sizemore supplies simple but powerful analytic techniques that fraud examiners could have used to find red flags in HealthSouth’s financial statements and possibly prevent this devastating scheme.

These techniques (among many) include:

• Trend analysis, which measures changes over time in a company’s financial statements
• Ratio analysis, which can compare different items in a single company’s current financials or contrast them with analogous items in the financials of competitors or other companies operating in similar industries.

Experienced auditors and fraud examiners rely on these techniques to expose and highlight inconsistencies and variations that could be signs of fraud and indicate a need for further investigation.

 

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