"Financial Shenanigans" is so good that Mebane Faber emphasizes checking your company against all the accounting shenanigans described in the book.
With the Chinese reverse merger frauds and the social media hype/bubble growing, you will definitely be better off scrutinizing the financial statements and getting into some forensic accounting work. This $23 book is what planted doubt into my mind with CCME and ultimately saved me thousands of dollars.
There is no better book than "Financial Shenanigans" to jump start your detective accounting work. Of all the accounting books I have read, there is none that is as descriptive, practical and applicable than Financial Shenanigans."
There is a reason why this book is used in business school and the lessons throughout each page is packed with information.
The early edition of the book only focused on earnings manipulation but the newly revised version includes a section titled cash flow shenanigans and key metric shenanigans which is a huge addition to the book.
Each section introduces you to how GAAP accounting can be played along with a supporting case study to hammer the lesson home.
As you read the book, you’ll realize like myself how amazingly simple it is to manipulate earnings. The author has also opened my eyes into seeing how easy it is to manipulate cash flow.
You’ll continually revisit the classic cases of Enron, Worldcom and Tyco along with plenty of other case studies for each financial shenanigan.
What are some of those lessons? Well take a look at the financial shenanigans Enron was involved in.
Earnings Manipulation Shenanigans
- Recording revenue too soon
- Recording bogus revenue
- Boosting income using one time or unsustainable activities
- Employing other techniques to hide expenses or losses
Cash Flow Shenanigans
- Shifting financing cash inflows to the operating section
- Shifting normal operating cash outflows to the investing section
- Inflating operating cash flow using acquisitions or disposals
- Boosting operating cash flow using unsustainable activities
Key Metrics Shenanigans
- Showcasing misleading metrics that overstate performance
- Distorting balance sheet metrics to avoid showing deterioration
Want more? Then buy the book and read it. You won’t regret it. A $23 investment will increase your knowledge by thousands of dollars. Although the book reads like a case study, the knowledge contained within feels like an encyclopedia.
You’ll be a better detective for it.