This six criteria will tell you the manipulation in financial statements:- Growing divergence between net income and cash flow (1 point). A higher level of accruals is associated with a higher likelihood of profit manipulation. Increasing receivable days (1 point). A large increase in receivable days might suggest accelerated revenue recognition to inflate profits. Increasing inventory days (1 point). Increasing inventory days could suggest that input costs are being artificially flattered or that sales growth is slowing. Increasing other current assets (1 point). Companies might be aware that investors often look at receivables and inventory, and might disguise problems in current assets. Declines in depreciation relative to gross fixed assets (1 point). Firms have been known to lower depreciation charges in order to inflate profits. Total asset growth in excess of 10% (1 point). Some companies become serial acquirers and use acquisitions to distort profits.