How to detect earnings manipulation

How to detect earnings manipulation via Quant Investing 

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

There a basically two main reasons why companies swim naked and that may lead to you losing your total investment:

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

In most cases these risks are often found together, companies that cook their books a lot of the time also go bankrupt.

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

They are...