This article highlights various approaches to accounting that can possibly lead to civil and criminal penalties. Because financial statements allow a degree of flexibility and discretion, highly skilled accountants with the right lawyer can this game while avoiding more serious consequences.

It is therefore up to the investor to be wary of creative accounting techniques :

a) Growth in accounts receivables exceed growth in sales 

This happens if you sell a sell a lot of products but keep extending credit terms so you never collect on the debts owed to you. This technique can boost revenue but minimize actual incoming cash flow. The final outcome is that the company eventually runs out of cash while looking profitable throughout this period.

b) Growth of inventories exceed growth of sale

This suggests that the company's products are crap and they are losing market share.

c) Ordinary expenses are included in restructuring charges and restructuring happens frequently

This can overstate...