Beware of these three accounting tricks

There are many crafty tricks that smart directors can employ to flatter their reported profits, says Tim Bennett. Here, he describes three of the most common, and how you can spot them.

If you're looking to invest in a company, you want to know that you're getting a realistic view of its past performance and its growth prospects. The most obvious place to look for this is in the accounts. But there are many crafty and legitimate little tricks that smart directors can employ to flatter their reported profits.

Here are three of the most common methods that firms can use to cook the books without breaking any rules and how you as an invesor can see through them.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.