This checklist of warning signs may just help you avoid your next Enron.

Income Statement Warning Signs

1. Are receivables growing faster than revenues?
2. Is operating cash flow significantly lower than accounting earnings?
3. Are depreciation/amortisation periods longer than peer companies?
4. Are there any unusual assets or unexplained large increases in assets such as inventory, relative to revenues?
5. Were one-time or nonrecurring gains included in revenue?
6. Were any gains or revenue based on revaluation of assets?
7. Are there unusually high margins relative to peers?

Balance Sheet Warning Signs

1. Is the company using operating leases to a greater extent than similar companies?
2. Does the company have insufficient assets on its balance sheet to support reported operations and revenues – particularly relative to other similar companies?
3. Does the company have significant assets that are subject to estimates or assumptions or where objective valuations are not available?
4. Were any gains or revenue based on revaluation ...