(a) One must understand the investment strategy of a company clearly.
(b) Cross check the investment strategy with the reported performance to catch any aberrations.
(c) One must be on the look out for e-mail solicitations and Internet fraud.
(d) One must avoid investing in the companies promising with eye catchy words like “sure things,” quick returns, and special access etc.
(e) Have a cross check of the balance sheet and observe if any regulatory oversight exists.
(f) One must be futuristic in approach and should be able to analyse the operational risk and infrastructure which can hamper the functioning of a company.
(g) One can not blind folded accept the Auditors report as Prince Water Cooper has brought disgrace to Auditor fraternity and thus must ask about independent audits and who performs them and take cognisance of the the personnel undertaking the check.
(h) One must undertake a background check of the personnel involved in audit of the firm.
(J) Avoid placing all eggs in a single basket and thus must limit the exposure in a particular stock.
2. If one can be diligent than one can foresee a fraud and thus can avoid being caught offguard.
