Dennis Jones, an old college friend, contacted you last week. Dennis owns several car washes, and he believes that financial statement fraud may be occurring. (He pays each car wash manager a bonus if a certain level of profits is earned and is worried that some managers are overstating profits to earn a higher bonus.) Dennis is coming over today to see whether you can help him determine if his suspicions are valid. He is bringing along the financial statements for each car wash (income statements, balance sheets, and cash flow statements) for the last five years.
What kind of financial statement analysis could you perform to help Dennis detect possible fraud?