From InvestoPedia, edited version, I took away some material that is not so relevant for Malaysia, the original article can be found here:
The Bottom Line
If you tune into the items hidden in a company's financial statements, you may be able to spot some of the warning signs that point to earnings manipulation. This doesn't mean that the company is definitely cooking the books, but if a company makes you suspicious, that's a sure sign that you should dig deeper before making an investment.
In the Malaysian context, warning signals are increasing Sales and Profits, but
- Decreasing Cash
- Increasing Debts (especcially short term is worrisome)
- Increasing Inventory
- Increasing Receivables
Classic accounting fraud cases in Malaysia (post 1997/98) are Megan Media and Transmile, apart from many other smaller cases (especcially on the ACE market).
There are currently a few others that have dubious looking accounts, only time will tell how they will end.