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You can put down whatever number you want for all of the variables in your formula. It's the auditor's job to make sure that a) they add up and b) they are correct.

I think the general idea is that outright fraud like this is highly likely to get caught eventually, and leads to jail time, meaning it’s quite uncommon for otherwise smart people to make such idiotic moves.

In other words it’s just not a big source of losses in the VC industry and so you don’t need to spend much effort guarding against it. (Especially considering that VCs expect most of their investments to fail for some reason or other.)

Balance sheets can be cooked. You need to compare against bank statements that you received from the bank and not the companyWhich again could be cooked.