TAILIEUCHUNG - ACCOUNTING: FOCUS ON THE RED FLAGS

A tax practitioner who, by passing an examination given by the . Treasury Department, can represent taxpayers before the Internal Revenue Service. Enterprise Resource Enterprise Resource Enterprise Resource Enterprise Resource Planning Planning Planning Planning (ERP) (ERP) (ERP) (ERP) A business management system that integrates all facets of the business to the related financial reporting functionality. Software applications have emerged to help business managers implement ERP in business activities such a planning, manufacturing, sales, marketing, inventory control, order tracking, and finance. ERP attempts to integrate. | Accounting Focus on the Red Flags Written by Richard M. Rockwood May 2002 Copyright 2002 . All rights reserved. This material is for personal use only. It is a violation of federal copyright law to reproduce part or all of this publication without written permission from . The goal of this short article is to show the investor examples of how companies can manipulate their reported earnings. This article also provides information on what warnings signs to look for. The article has taken information from a variety of sources in order to provide the reader with a quick overview of accounting red flags. Focused investors practicing portfolio concentration should be particularly aware of these issues. I have written the article for the individual investor who has an intermediate level of accounting knowledge. That being said I believe the beginning investor with only a moderate understanding of accounting will benefit from a close reading of this article if for no other reason that to understand what elements of accounting they should study more closely. While this article focuses on accounting issues all investors should investigate the management team of a company before investing since the management team has such a strong influence of any companies operations and how they report their results. To this end I would strongly urge all investors to first study the way management treats their shareholders. Do they provide an accurate picture of their business in their annual report Do they discuss the negative issues in addition to the positive ones If they treat the shareholders like owners and behave ethically then in the vast majority of cases this accounting red flag list will not be needed. List of Accounting Red Flags 1. Companies Conducting Large Amounts of Merger Activity Companies that have experienced a slowdown in the growth of their businesses or that have already been practicing accounting deceptions may use merger activity

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