SGX Academy course: 36 Red Flags in Financial Reports - How to Detect Accounting Gimm

[kazukirai]

Hey Buddies,

Anybody else going or been to this course? Or attended a seminar/course by this Speaker?

I've signed up for the course, which runs from 4-5 Aug and 11-12 Aug (4 nights) from 7-10pm.

I think this course would be helpful for the accounting challenged (like myself) as it helps identify which items to look out for in the Financial Statements and how to ascertain if these are problems.

I'll let you guys know how the course turns out. More details in the link below for those also interested in attending.

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36 Red Flags in Financial Reports - How to Detect Accounting Gimmicks and Fraud (link here)

This highly interactive workshop gives you the State-of-the-Art weapons you need to identify warnings of a company’s problems before earnings come out and the damage is irreversible. You will learn the 6 categories of financial gimmicks and the 7 fundamental tricks that companies have used to mislead auditors and investors for decades. You will also get an update on how these financial gimmicks are being used in todays’ technologically advanced, financially savvy investment world.

Speaker's Profile:

Mr. S. S. Sandhu

Mr. S. S. Sandhu FCA, CPA has extensive experience working within the financial markets sector in Asia. He has deep technical knowledge covering listed companies, multinationals, initial public offerings and mergers and acquisitions due diligence gained over 18 years at PricewaterhouseCoopers. He was also the CFO of one of the largest financial institutions in Singapore. He is both a Fellow Chartered Accountant and a Certified Public Accountant and has provided advisory services to many public listed companies, multinationals and government-linked companies on the development of financial reporting standards and changes in regulatory environment.

Mr Sandhu is a highly sought after speaker at financial seminars and courses around the world and has authored and contributed many publications on corporate governance, risk management and international accounting standards. He is highly rated by participants who have attended his programs. He is particularly well-known for his ability to translate complex and difficult financial concepts into plain language, and the use of real life experiences, easy to understand illustrations and case studies to help the candidate's ability to understand finance and accounting. He adopts a highly interactive approach in his workshops which makes learning both fun and memorable.

[yeokiwi]

Can't find much information on the speaker, S.S. Sandhu, profile on internet.

[weijian]

hi kazukirai, just wondering how did this course turned out?

[kazukirai]

Hi Weijian,

The course turned out pretty good actually. I feel that there were two useful aspects to the course- 1) The overview of how and why fraud is perpetuated; and 2) the instructor's background as an auditor.

The speaker, Mr. Sandhu has a lot of experience as an auditor so it was very interesting to know how audit work is done and from there, one can see the limitations of financial statements as a tool. There are some tidbits to takeaway but it shows you how much one needs to know about accounting in order to identify where tricks could be used.

Mr Sandhu also used a lot of case studies in the course to show the different types of fraud committed. All were pretty interesting e.g. Enron, Worldcom etc. and could have been detected if one bothered to comb through the financial statements with a fine tooth comb but problem is how many of us would have done that?

Another interesting case with direct impact on an investment decision that he brought up was SIA's case where an allowance clerk made false allowance claims and when news broke, SIA's share price took a hit. However, Sandhu bought more as he said that these fraudulent claims were already expensed in prior years statements and in fact, they might be able to recover part of these claims when the fraud was discovered so I thought that was one interesting lesson to takeaway too.

HOWEVER, I think too many of the people attending thought that they would be learning a magic formula to identify companies that perpetuate fraud so they might have been a little disappointed when the reality is that even after attending the course, if one doesn't have a good grounding in Accounting and is willing to comb through the financial statements, it will be for nothing.

In short, I would say the course was useful to understand the nature of the beast rather than learn how to slay the beast.

[weijian]

hi kazukirai,
Thanks for the update. i browsed the website and realized that a 2nd session is starting in early Nov, but i seemed to have missed the boat to register...
Nonetheless, the course price is $350, makes out to $90 per day.. In your opinion, do you think it is a value buy if there is a 3rd one?

Detecting fraud and learning to smell a rat seems to be one of my major weakness.. I reckon i have spent much greater amts drilling some hard lessons into my mind on fraud... (Well, i guess i have answered my question to u but would just like to find out more from an insider)

[setan]

Hi Kazukirai,

Do you think the course is suitable for those who have no proper accounting knowledge?

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Hi Kazukirai,

Do you think the course is suitable for those who have no proper accounting knowledge?

[hongonn]

I am no expert in accounting, drilling and analyse every figure and footnotes are becoming quite exhausting to me.

In the end to avoid fraud case, it becomes looking for a company i felt comfortable with. So slowly it turns up these few criteria:

1. Don't invest in newly listed company for less than 5 years.

2. Don't invest in S-chips, since i don't trust them all. Don't tell me this S-chip is different, it just don't worth the risk you are taking.

3. Don't invest business that i totally don't understand, to be safe, it's better i can see their business. Consumer stocks are good choice to me.

4. Keep monitor the stocks for many years, if the company has been listed for many years, and business is consistently good, the chances of fraud case is low.

5. At last, if unlucky encounter a fraud case, be the 1st to throw the stock away whenever you hear any investigation case. It is always turn up opening a can of worms. It always worse than you expected when you hoping for the better.

These slowly becoming my simple rules of guideline, instead of avoiding stock market of all, or drilling and suspecting the figures like i am an expert.

[kazukirai]

Nonetheless, the course price is $350, makes out to $90 per day.. In your opinion, do you think it is a value buy if there is a 3rd one?

Detecting fraud and learning to smell a rat seems to be one of my major weakness.. I reckon i have spent much greater amts drilling some hard lessons into my mind on fraud... (Well, i guess i have answered my question to u but would just like to find out more from an insider)

Hi Weijian,

Frankly, the course contents itself will not be worth the amount you pay (plus you add in the opportunity cost of the time you took to attend the course) since you could easily read through some of d.o.g.'s posts, borrows Schilit's Financial Shenanigans (easy read) and Mulford's two books (drier/harder reads) and whatever wealth of material Google offers you for the same contents. After all, it's not rocket science otherwise we all wouldn't be here.

Of course, the upside to the amount you pay for a course is: all the material is nicely organised and delivered (which helps if you don't know where to start or don't have as much free time to sift through and collate the info; digestion is still something you need to do on your own). The added PLUS, in my opinion, is getting to know Mr Sandhu and tapping into his prior experience as an auditor. If you ask the right questions and pay attention to the right anecdotes, this is worth much more than the amount you pay for the course.

Hi Kazukirai,

Do you think the course is suitable for those who have no proper accounting knowledge?

Hi Setan,

I think it's ok since Mr Sandhu uses very easy to understand analogies but I think his Business Finance for Investors and/or Analysing Financial Statements course will be a much better course to attend for a start.

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hongoon's rules are pretty good for start. I'd add that some basic accountg based rules will be:

- CFO and NI diverge (e.g. NI positive but FCF consistently negative)
- Drop in receivables t/o and inventory t/o (esp relative to peers)
- Unsustainable margins (this one requires some judgement)

Above just some examples to illustrate the idea.

[Jared Seah]

Besides detecting fraud (black and white illegal), there is also Corporate Governance (more a grey area).

I've learnt a lot from one of our fellow forum member's blog below:

http://whereiszemoola.blogspot.com (Yes, it's free! He has a high tech ad something in his blog where you will be direct to another site. Don't be alarmed like me. I sotong! I thought his site got virus attack! Silly me. Just click the skip ad button on the top right corner, and you will get back to his blog.)

You just search under Corporate Governance amongst his many interesting posts. It's about Malaysia counters, but it can be applied to Singapore and S-chip counters too.

It's about trust (or lack of). Why invest in companies run by wolves, foxes, and rats?

I wouldn't go as far as to say ALL S-chips are bad, or don't trust new IPOs. This is also dangerous as it "assumes" other companies are "safe".

I prefer to learn from others how to spot the tell-tale signs of "this is strange!?" and make my own judgement.

I practice Trust but Verify.

[Temperament]

I am no expert in accounting, drilling and analyse every figure and footnotes are becoming quite exhausting to me.

In the end to avoid fraud case, it becomes looking for a company i felt comfortable with. So slowly it turns up these few criteria:

1. Don't invest in newly listed company for less than 5 years.

2. Don't invest in S-chips, since i don't trust them all. Don't tell me this S-chip is different, it just don't worth the risk you are taking.

3. Don't invest business that i totally don't understand, to be safe, it's better i can see their business. Consumer stocks are good choice to me.

4. Keep monitor the stocks for many years, if the company has been listed for many years, and business is consistently good, the chances of fraud case is low.

5. At last, if unlucky encounter a fraud case, be the 1st to throw the stock away whenever you hear any investigation case. It is always turn up opening a can of worms. It always worse than you expected when you hoping for the better.

These slowly becoming my simple rules of guideline, instead of avoiding stock market of all, or drilling and suspecting the figures like i am an expert.

Hi,
1) May i add, how many years the company has been paying dividends
consistently?

2) Never speculate even with money you have made from the market.
Don't ever think that's not your money.