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Unveiling Cash Flow and Metrics Shenanigans in Forensic Accounting

Explore deceptive tactics like shifting financing inflows, inflating operating inflows, and distorting metrics to uncover fraudulent activities in financial reporting. Gain insights into cash flow manipulation and metric distortions.

pandora-gilmore
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Unveiling Cash Flow and Metrics Shenanigans in Forensic Accounting

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  1. Today’s Topics • Cash Flow Shenanigans • Metrics Shenanigans FORENSIC ACCOUNTING - BA124 - 2011 Slide 19-1

  2. Cash Flow Shenanigans • CFS #1: Shifting Financing inflows to Operating inflows • CFS #2: Shifting Operating outflows to Investing outflows • CFS #3: “Inflating” Operating inflows through normal but infrequent ops • CFS #4: “Inflating” Operating inflows through normal operations FORENSIC ACCOUNTING - BA124 - 2011 Slide 19-2

  3. CFS #1 • Bank borrowings as CFO • Sale of receivables as CFO • Sham sale of receivables as CFO FORENSIC ACCOUNTING - BA124 - 2011 Slide 19-3

  4. CFS #2 • Boomerang transactions • Capitalization of operating expenses • Treating inventory purchases as investing activities FORENSIC ACCOUNTING - BA124 - 2011 Slide 19-4

  5. CFS #3 • Inheriting cash flows via acquisition • Acquisition of customers or products • Structuring a divestiture to benefit operating cash flows FORENSIC ACCOUNTING - BA124 - 2011 Slide 19-5

  6. CFS #4 • Paying vendors more slowly • Collecting from customers more quickly • Purchasing less inventory • Limited disclosure of one-time benefits FORENSIC ACCOUNTING - BA124 - 2011 Slide 19-6

  7. Metrics Shenanigans • MS #1: Misleading metrics that overstate performance • MS #2: Distorting metrics that avoid bad news FORENSIC ACCOUNTING - BA124 - 2011 Slide 19-7

  8. MS #1 • Proforma revenue metrics • Proforma earnings metrics • Proforma cash flow metrics FORENSIC ACCOUNTING - BA124 - 2011 Slide 19-8

  9. MS #2 • Distorting A/R metrics • Distorting inventory metrics • Distorting financial asset metrics • Distorting debt metrics FORENSIC ACCOUNTING - BA124 - 2011 Slide 19-9

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