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Red flags for bust-out and bleed-out schemes
Bust-out and bleed-out schemes involve setting up a company,
collecting money from customers, not paying vendors, then filing for
bankruptcy.
Bust-out Bleed-out
Short-lived companies New parallel company
Suspicious buyouts Leveraged buyout
Financial statement fraud Recent change in ownership
Fictitious credit references Depleted pension funds
No, or weak, accounts receivable Repayments of loans to investors
Low inventories Changes in cash flow patterns
Reliance on part-time employees Changes in payment patterns
History of business failures
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