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2012, vol. 41, iss. 3, pp. 22-51
Red flags analysis
Abstract
Many financial scandals that have happened recently were usually followed by manipulations in financial reports. This only further confirms how important are the information contained in financial reports. If they were not important there would be no need to present them erroneously. State regulatory framework and the accounting profession in the developed market economy countries reacted by striving to build up a better institutional framework for financial reporting to be characterised primarily by an enhanced role of the state in supervising financial reporting practices. In addition to standard financial analysis, financial analysts are increasingly applying some of the non-standard methods that may serve as warning indicators of the presence of creative accounting practice. Practical experiences have developed certain benchmark values that identify the need for additional research in case the values of studied indicators are sending warning signals, in order to avoid making misinformed business decisions. Quantitative warning indicators used by financial analysts are further supported by the so-called qualitative warning indicators which are describing events and activities that may point out at the possible presence of creative financial reporting.
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article language: Serbian
document type: Original Scientific Paper
published in SCIndeks: 22/03/2013

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