Introduction to Forensic Accounting | How Companies Manipulate Profits | Accounting Frauds in India

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In this video, I shall be introducing you to the world of forensic accounting and the research here is inspired by "Financial Shenanigans" - Howard Schilit's renowned book. I have made it more recent with Indian examples of companies that have manipulated their revenues, expenses and therefore their profits and how an investor can detect these accounting frauds and avoid such unscrupulous companies

Specifically, we'll be looking at 5 major manipulations:
1. Accounting Policy Changes: We'll look at how Byju's was pulled up by their auditors and forced to make changes to their revenue recognition policy
2. Channel stuffing: We'll look at the paints industry and how using receivables data we examine how the pumping-of-volumes can be detected
3. Fictitious revenue: The case of Urja Global and Zacobite comes to light here wherein the company created something out of thin air
4. Shifting expenses to a different period: We see how using something like changing an asset's life duration, a company can reduce depreciation to boost up the profits
5. Capitalize expenses as assets: This certainly defies accounting principles and Globus Spirits Limited did this a few years back by capitalizing advertising & promotional expenses and inflating their profits by a significant margin

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👉 Video Chapters:
00:00 Financial Shenanigans
01:35 Companies I am Cautious Of
03:31 Manipulation of Accounts
05:28 1. Accounting Policy Changes
07:45 2. Channel Stuffing
09:12 3. Bogus Revenue
12:11 4. Shifting Expenses to Different Time Period
14:43 5. Capitalizing Operating Expenses to Balance Sheet
17:06 Shankar's Viewpoint

👉 Additional Reading material:
‣ Financial Shenanigans by Howard Schilit (book link): https://amzn.to/3RR6Ycb
‣ Luckin Coffee Fraud:    • Luckin Coffee Scam Revealed: How They Got ...  

#forensicaccounting #accountingfrauds #financialshenanigans

Disclaimer: I am not a SEBI registered investment advisor or research analyst. I am not registered with PFRDA or IRDA either. The content posted on this platform is purely for educational purposes and none of it constitutes investing or trading advice. Viewers should do their own research and diligence before investing or acting on the information presented. Some of the links I have posted in the video, the description, the comments and other related resources might be affiliate links