CanDo Pty Ltd is a company that has enjoyed enormous success since it started importing luxury motor vehicle accessories from China, from back in 2010. Over the last financial year (year-ending 30 June), arguably, it was not surprising to see sales revenues more than triple from the previous financial year. As a result of this success, the company is considering "going public" by making an initial public offering (IPO), by the start of next year.

The company has two executive directors, who have been working together at this company since they started the business while they were studying a business degree at university. In addition to these directors being the best of friends, their partners also went to the same university, and are also very close to each other. Last March, the company appointed two non-executive directors in order to prepare for the initial public offering and fulfil Australian Stock Exchange (ASX) listing requirements. These directors have their own successful businesses in the same industry, and are purely business acquaintances of the two founding directors. Prior to the start of this financial year, the two founding directors had been meeting to discuss how the business is doing only twice a year. Given that it may be necessary to discuss issues regarding the upcoming initial public offering, now the board of directors (including the two non-executive directors) has decided to meet five times a year. The board continues to compensate the executive directors and senior management generously with share options and cheap loans for their "excellent work". In addition, since the start of this financial year, the sales team has been working very hard to significantly increase sales revenues, especially, since they started receiving even more generous sales commission from July as an incentive to increase their selling efforts.

However, the Australian Stock Exchange (ASX) is concerned with the rapid sales growth in recent years. It has employed you, as a fraud examiner, to examine the company. Your examination reveals that all the directors have close relationships with many wealthy private investors, who are all extremely excited about the upcoming initial public offering. A search of public records at the Australian Securities and Investment Commission (ASIC) reveals that at the start of the previous financial year the company had changed its auditors. As you further investigate this change of auditor, a reliable "whistle-blower" at the audit firm informs you that the change in auditor was due to a "heated dispute" between one of the founding directors and the audit partner. The argument was over the most aggressive manner that sales revenues were being recognized, particularly, in recent years.

Answer the question below.

Discuss up to nine red flags or symptoms that indicate that financial statement fraud may be occurring?