Da: You're a better cat than I am - I only noticed one error, but it was glaring enough. During 1996, according to DHMG's balance sheets, inventories rose by $354,508. In the cash flow statement, instead of subtracting that figure, since it represented an absorption of cash, they instead added a figure of $301,416 as if inventories had been reduced by that amount. Since inventories started out the 1996 year at $142,268 they couldn't have gone down by that amount without becoming a negative figure, which is impossible. Adding $301,416 instead of subtracting $354,508 made cash flow from operations look very positive, when in fact they were in the red.
Could that have been just a typo? No, because the wrong figure was added in, instead of the right one. Could it be an isolated error? No, because at the end of the cash flow statement, the beginning and ending cash on the balance sheet are reconciled correctly, or what would be correctly if +301,416 were right, which it isn't. So some other numbers in the income statement and/or balance sheet have to be phony too, in order for that reconciliation to take place successfully.
If there is a better explanation of this than willful, intentional, cooking of the books, I'd like to know what it is. I'd like to believe that the auditors and the management are merely idiots, and not crooks, but how could that cash flow statement reconcile with some wrong numbers in it, unless other numbers were changed to make it reconcile?
What kind of auditor would allow this to happen?
The SEC is aware of this, and the SEC has good communications with the NASD, I believe. Accordingly, I would be surprised if the NASD accepts the "voluntary audit" of DHMG by this auditor as having any value at all.
What else did you find in the 10-K? |
