can ratios of companies be manipulated

Of course it can be calculated Sandesh sir, by calculating the historical costs and different kinds of valuation of assets like LIFO and FIFO, organisation rtios can be manipulated.

Yes Sandesh sir,

it’s the company or accountants. Regarding auditors I think, there can be fraud due to teeming up and some of the icai members were punished for this. Also the auditor can be held liable if he is proven to have not exercised professional expertise and due diligence.

And sometimes by the particular nature of the industry work of auditors become more challenging. For example in the case of satyam itself, dealing with computer software (intangible and technical knowledge) auditing of work in progress, goods in transit, finished products etc are very demanding and usually they can only look for some supporting documents or corroborative evidence. Also auditors are usually at a disadvantage when it comes to fraud by top management and teeming and lading fraud.

I think we should give more thrust to forensic accounting, internal control and better laws to prevent and curb corporate fraud. Recently an article comparing our judiciary system to us’s,  Bernard Madoff who was arrested in last December for cheating investors sentenced to 150 years within 6 months  while in the case our former satyam CEO who was also arrested in last December the trial is yet to begin.

The use of ratios is not only for investments but it is also used by Financial controllers to set the targets for different accounts. If they manipulate these ratios then what they do at the control level will be deviant.

it is no th e auditors who does the accounting .yaa at times they may be consultanst to such acts.it is the management of th ecompany which prepares the accounts the auditors audit it and vouch it to the best of there knowledge to the correctness and the guidelines of institue of chartered accountant is followed.

infact a auditor is a agent of the state.he is appointed because the law requires him to audit the accounts and give his observation s required by the institue and various statutes.

I also agree with what Darshil sir said, they can be easily manipulated in the short run using opportunistic accounting

Accounting policies and practices affect financial ratios. They are based on historic costs and can be misleading during inflation and change in methods of valuation of assets (lifo, fifo),depreciation, classification into current and noncurrent, accounting period used, capitalization of expenditure etc can affect.

I agree with dear Darshil's answer and example of satyam is also timely which leaves nothing to argue.

Ratio's of the companies can be easily manipulated by the auditors and the companies. As raios are not to be manipulated the inputs of the ratios are to be manipulated by window dressing of the balance sheet items.

As in the case of Satyam the ratios reflected as one of the best bets in the I.T. industry and even the analysts used to advice retail investors to invest for long term. But the window dressed balance sheet had a hidden cash reflected which did not exist physically, so the ratios were easily manipulated by the auditors and the comapny.