I'm sure others will have much to add but here's a start:
Ideally you need to remove the engine from the heli and the muffler. Look into the exhaust opening for the colour of the piston top which should be either metallic or slightly honey coloured at most. Check for scoring of the liner and any irregularity of the piston.
To test compression, make sure that there is some oil through the engine and turn it over using the fan with a plug in situ. It should require obvious force to turn it over. Do it slowly to listen for compression being lost past the ring - you will also feel the loss of compression too. If tested for compression in the heli, it is impossible to turn the engine over past compression using the starter coupler between your fingers.
I'd be very interested in the main bearing. You would need to remove the back plate to look for corrosion and runout or play in the bearing. Feel for roughness also. If there is any doubt, replacement is indicated as a bearing failure can mean a wrecked engine.
Finally, ask to hear it running: does it idle, does it rattle, does it transition well, how well does the heli climb out(power), are the needles in standard position, how hot is the backplate straight after landing etc.
If you have little experience, better still, ask an expert to look at it for you.
I hope this helps.