Another is lack of consistency of accounting policies over periods. When accounting practices change too frequently for reasons not justified enough, it may perhaps be an attempt to manipulate the results of its financials. The most serious red flags in financial reporting are aggressive and unusual accounting practices. Companies would inflate earnings through creative accounting measures, smooth revenue, and hide expenses. For example, a company realizes revenues precociously by recording sales even before the delivery of the product or service. These methodologies would indeed create distortions of the real performance of the company.
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