Large frauds can often be detected by performing financial statement analysis. Although such analysis can raise areas of concern, not all red flags are the result of fraudulent activities. Reasonable explanations often exist for anomalies in financial statements. The statement of cash flows is one financial statement that is analyzed in order to identify possible fraud. This statement for Kelly Enterprises, Inc., for a three-year period is shown in the table on this page.

1. Identify possible red flags.
2. Indicate if reasonable explanations exist for the areas ofconcern.

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KELLY ENTERPRISES, INC. STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED DECEMBER 31, 2012 IN MILLIONS Cash from Operations Net income Change in accounts receivable Change in accounts payable Change in inventory Depreciation Net cash from operations Cash from Investing Additions to property, plant, and equipment Proceeds from sale of securities Net cash from investing Cash from Financing Borrowings of long-term delbt Cash dividends Net cash from financing Increase (decrease) in cash 2012 2011 2010 S900 (706) 150 (50) 105 S 499 S800 (230) 45 15 90 S 450 25 90 25 65 s (950) 25 S (925 s (690) 56 s (634 (790) S(775) 250 140) S 110 S (316) (150) 85 S 65 S 121 S 34 45