60% of the accounting frauds take place in the top line.
1). Sharp decline in cash collection to sales ratio.
cash collection = (sales - change in accountsreceivable + change indifferedrevenue)
2). sharply Increasing days of sales outstanding(DOS).
DOS = 365/(Sales/accountsreceivable)
3). aggressive revenue recognition policy.
4.Lowerdays of sales outstanding(DOS) accompanied by factoring.
5). sharp decline in sales to working capital turnover
6.Frequent Inconsistency in firmsdefinitionof operating revenue.
7). Barter transactioncontributing significantly to top line.
9.Significant sales to related.
10.Integratedcustomerbase(if theintegrated customer base is present then look for the customers capacity to pay).
11). Price sensitive customers.
12). Operating in highly competitive market with the subject company having no pricing power.