As a lender, do you check authenticity of the financial statements ? Please explain the various checks you use. The answer might differ from country to country. Please do post the country you are discussing about and answer the same.

In my country

Libya

The auditing of the cash flows of the borrower

According to the balance sheet during the past six months

To study the extent of the seriousness of the borrower

And also that the reputation of the borrower's financial history

Very important

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There are common rules of thumb when looking at Financial Statements:

1. The level of experience of the company management in charge of preparing the financial statements. this is why "Management Profiles/Bios" are a critical part to judge the first level of comfort regarding the financial information prepared by the company;

2. The quality and ranking of the auditors auditing the financial statements. In many countries, Central Banks/Professional auditing bodies publish a quality ranking of the member auditing firms in each country, thereby, providing a quick reference to assess the level of comfort an analyst can establish with regards to the quality and accuracy of the financial information reported;

3. "Cash is King", a crucial "acid test" to the validity of financial statements is to establish a "cash measure". Bank account turnover are usually a very important tool to compare with reported Company Sales/Turnover in the financial statements. While reasonable deviations are expected and acceptable (due to the "accruals" rules of preparing financial statements), major deviations are always an alarming signals. 

The two main sources of financial statement inaccuracy are deliberate dishonesty and incompetence. There are two principle ways to combat these problems. The first method is to regularly hire an outside accounting firm to audit the financial statements. In an audit, the outside accountant tests reported account balances for accuracy. As importantly, the auditor tests to see that the accounting principles used in recording transactions are in conformity with GAAP and applied on a consistent basis. Despite some notorious recent audit failures involving large corporations, the auditing process, in most cases, provides a reasonable safeguard against fraudulent and inaccurate financial reporting. 

The second method used to prevent fraudulent and inaccurate financial reporting is the adoption of adequate internal controls. Internal controls are the policies and procedures that a business can take to safeguard its assets, insure accuracy of financial reporting, and prevent fraud. These methods are not mutually exclusive. In the best of all worlds, firms would have both good internal controls and regular audits.