Thesis Abstract Banks have done factoring for 10 years and have always viewed the operation as a self-compensatory and low-risk sort-term loan. Hoever, banks have suffered great credit losses in cases such as Procomp, Ya-Hsin and Everskill in recent years, which have made banks adopt a more careful approach when dealing this kind of business. By collecting rules of factoring of some banks and making references to international practices, this research attemps to recognize alarming signs and builds a better warning system in the hope of reducing or avoiding potential Credit losses. This warning system does audits from different approaches such as 3 major transaction subjects of factoring, 4 risk aspects, and 6 operation processes. It also uses analytical double-checking mechanism to audit the accuracy and rationality of each transaction from both the seller and the buyer, thus greatly reduces risks by detecting fake transaction at earliest possible time. Key Words: Factoring, Dispute, Fake deal, Risk Management.