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Financial Follies: Identifying Accounting Fraud

An annual report will tell an investor many important facts about a company. It will tell you what a company does, how it makes money, whether it's profitable, how big of a debt burden it has, the value of its assets, etc. If read correctly, it can also tell you whether a company is being lenient in its accounting, or just outright committing fraud.

Recently, I stumbled across a company that was waving bright red flags everywhere I looked. For the sake of this case study, I will not be using its real name. Instead, it will be referred to as "EZAccounting Corp." or "EZ."

Item 1. Business
We were incorporated in May 1999 as "Breezy Strategies." In May 2010, we merged with "Sweet N' Simple Co," and in June 2010, we changed our name to "Elementary Accounts." On August 2013, we filed for  our Initial Company Information and Disclosure Statements with the OTC Markets, and we changed our name to "Plain & Simple Co." On Ma…

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