The Scenario
A company's revenue has grown 30% per year for 3 years, but operating cash flow has been flat. Accounts receivable has doubled. The auditors signed off, but something does not smell right.
The Brief
Analyse the hypothetical financial statements and identify the red flags. Explain the manipulation techniques that could produce these patterns and design 3 forensic checks an auditor should have performed.
Deliverables
- A list of at least 5 red flags with specific ratios or trends that support each
- An explanation of the most likely manipulation technique (channel stuffing, premature revenue recognition, etc.)
- Three forensic checks with the specific data or documents you would request
- A one-paragraph opinion on whether these financials should be trusted
Submission Guidance
Revenue growing while cash flow stagnates is the classic red flag. But what specifically could cause it? Be precise about the mechanism.
Submit Your Work
Your submission is graded against the rubric on the right. If you pass, you get a public Badge URL you can share on LinkedIn. There is no draft save, so work offline first and paste your finished response here.