Financial Shenanigans, Fourth Edition: How to Detect Accounting Gimmicks and Fraud in Financial Reports

I regret not reading this book sooner but am immensely happy with my decision to finally take the plunge. Accounting is such a technical field that it's easy to get lost in the weeds, but Howard Schilit does a fantastic job of keeping you grounded in the aerial view while delving into detail only when it's important. I have done public company analysis for many years (including some of them as a professional financial analyst/investor) and I decided to flag each page of the book where I learned either something entirely new or a new way of looking at the eccentricities of the financial statements. The value of this book is simple: I ran out of flags because I tagged so many pages. What I found helpful (and wish the author had included more, despite the fact that every chapter had multiple) were the direct quotes from corporate filings (usually the 10-Q/K) and parsing out what words or word changes matter and why. When I read annual reports now, I am much more sensitive to slight variations in descriptions of policies, sales, or even business between companies. If I had taken more than introductory accounting courses, I don't know that this would have been so helpful. But I didn't take those accounting courses and this was a great primer in why it's important to understand the nuance and mechanics of the financial statements. The timely examples, the parsing of corporate communications, and the great structure (where early examples in the book are used later on to illustrate more complex or well-hidden frauds) make the book a good read for someone with enough education to be literate in financial statements but not enough to forensically analyse them. Needless to say I recommend the book. I already gave a copy to a coworker -- who was similarly impressed.

This book is probably of greatest value for investors in public market equities and for auditors of such companies, but it's also of use to investors in private companies and it's sufficiently well written that much of it will entertain fans of books about white collar crime and similar malfeasance. The authors explain what they're going to explain, then they explain it, then they explain what they just explained. And they use a lot of examples, mostly from the period around Y2K I think. At the end are three more in-depth summaries of companies that thrived under aggressive accounting practices before imploding. My only complaint is that I wish that section were a lot longer and covered a longer time period.

If you are interested in studying corporate financial fraud, then this is the book to own. I give it four stars instead of five only because it needs to be updated.

I have been practicing law in the area of financial fraud for twenty years, and have used every edition of Financial Shenanigans to help identify and describe the accounting gimmicks and cheats that keep showing up in one big fraud after another. The authors explain that all of the major accounting frauds you ever heard of involve one or more of these shenanigans, or some variation on these shenanigans, and that insight is key to recognizing and sorting them out. This is far and away the best source available for a real understanding of how these financial frauds actually work, and with that understanding to know where and how to look for the evidence.

Howard Schilit, Jeremy Perler, and Yoni Engelhart subdivide their comprehensive examination of financial shenanigans into four parts: 1. Earnings manipulation shenanigans; 2. Cash flow shenanigans (an eye-opener); 3. Key metrics shenanigans; 4. Acquisition accounting shenanigans. To their credit, the authors clearly demonstrate that financial shenanigans are much more widespread that a casual observer of the corporate world would believe. Unfortunately, financial shenanigans are not limited to infamous bad apples such as Enron, Lehman Brothers, Tyco, Valeant Pharmaceuticals, and WorldCom, to name a few. The management teams of well-known companies such as Dell Computer, GE, Home Depot, Li & Fung, Netflix, Softbank, and Thomson Reuters have also succumbed to the temptation of embellishing their financial performance at the expense of their investors. The overall message of Messrs. Schilit, Perler, and Engelhart is that investors should assume that the urge to exaggerate the positive and hide the negative will never disappear. And where temptation exists, shenanigans often follow. For these reasons, investors are strongly encouraged to apply the ten tenets of the forensic mindset to detect accounting gimmicks and fraud in financial statements. In summary, the book under review is a must read for anyone investing in individual securities.

This book is a must-read for any investor and those who seek to acquire financial literacy. The writing style is very entertaining, even humorous in it's delivery. I enjoyed every moment of this book and will refer back to it when necessary. I guess I've become a forensic accountant analyst by just reading this book.

Likes -Written somewhat informally -well organized approach to laying out accounting techniques -great clipping of sources (10-k disclaimers, financial statements) -short book Dislikes -wish the author would have provided further book recommendations in the "never stop learning" section :)

My son is in the masters program and had to have this book per his professor. Only reason I purchased it. I can’t say he enjoyed it.

Fand es sehr hilfreich, jedoch schwerer zu lesen. Am Besten nimmt man sich einen Jahresbericht, den man parallel liest, um die Kapitel gleich anzuwenden

Great! The best in town to uncover any kind of financial trick!!

Very good summary of the various types of frauds and imptoper accounting adjustments designed to mislead investors

Excelente libro para entender las principales deficiencias del mundo de la auditoria y contabilidad

Quality of page is great and worth to read more about accounting gimmics and financial frauds.