Different Methods for Uncovering Red Flags and Fraud

"After all, you only find out who is swimming naked when the tide goes out.  - Warren Buffett"

There a basically two main reasons for a total loss of capital

• companies that are cooking the books -> financial statements manipulation and fraud

• bankruptcy

In most cases these risk are frequently found together.

Management’s desire to put a positive spin on financial results has been around as long as corporations and investors themselves. Dishonest companies have long used these tricks to prey on unsuspecting investors, and it is unlikely that they will ever cease to do so.

It is a understatement to say that investing...