Customer Reviews

The Financial Numbers Game: Detecting Creative Accounting Practices

5 star:		(15)
4 star:		(2)
3 star:		(7)
2 star:		(1)
1 star:		(1)

 

 

Given the promise of the book's title, I was disappointed. "The Financial Numbers Game" is really alomst a misnomer as the book spends many pages on explanations of basic accounting principles - much like an introductory textbook - and then discussed some of the more obvious creative accounting practices. What you do get from this textbook is an overall solid overview of basic GAAP, with a large number of real world examples (which is good). What you don't get is real insight into some of the more interesting ways companies use to manage earnings and their balance sheet. For example, I could not find anything on special purpose entities, off balance sheet financing, dirty surplus accounting, a meaningful discussion of EBITDA beyond the basics, and anything beyond the obvious, really. I also thought the discussion of receivable days was problematic (chapter eight). This may go into too much detail but the authors calculate this ratio based on the ending balance of accounts receivable rather than some average (eg, beginning and ending balance if nothing else is at hand). This actually distorts the ratio and results in an incorrect analysis of the development of receivables where they change between periods. This is not good for two academics.

As previous reviewers pointed out, the book has too many repetitions which a good editor should have caught.

I like the solid accounting overview and the multitude of examples the text provides and that merits three stars. If you are an MBA student who is interested in an accounting refresher, this may be a book for you. If on the other hand you are a professional analyst or investor - what the authors call serious readers of financial statements in their preface - then this will disappoint you.

Having recently worked through all three of Mulford and Comiskey's financial reporting texts, I'd like to comment on them as a group.

The Financial Reporting Game contains unique material which I have not seen outside of specialized academic journals, and discusses most of the parameters I use in my own earnings manipulation model, developed through painful experience and correspondence with other practitioners. I suggest this text as a more efficient means to acquire this knowledge. The first five chapters of introductory material discuss the motivation and consequences of earnings manipulation from the viewpoint of the regulator, the reporter, and the user of financial statements. While the preliminary chapters are less quantitative than the rest of the book, I believe they cover the subject far more comprehensively than Fridson's Financial Statement Analysis, or any other text I can recall.

Guide to Financial Reporting and Analysis is indispensable, and one of the most practical texts on applied security analysis available. The efficient search procedure for non-recurring items is alone worth the cost of the book. I'm convinced that one of detriments to effective use of periodic and annual financial statements is the opacity of the notes to consolidated financial statements and their frequently indecipherable relation to the consolidated tables themselves. The authors propose and demonstrate a framework for relating complex financial notes into the core activity of the security analyst, which is measuring the sustainable earnings power of the corporation under study.

Financial Warnings predates Guide to Financial Reporting and Analysis by four years. Its focus is on how corporate accounting choices can change perceptions and calculations of sustainable earnings power [and consequently stock valuation]. Financial Warnings suggests and demonstrates clear techniques for analyst restatements. I found it helpful to work through Financial Warnings after I had completed Guide to Financial Reporting, in order to test my understanding of the accounting principles discussed.

To sum up, I strongly feel that if you take the time with a spreadsheet and a 10K to work along with the dozens of examples provided by the authors in each of the texts, the quality of your financial analysis will improve both in accuracy and in rigor.

Mulford and Comiskey badly need an editor, clear-sighted and heartless. There is a wonderful book here, but it is maddeningly difficult to extract from the text as presented -- ill-organized and repetitive and in coverage, perhaps even haphazard (another reviewer note that they don't cover reserves -- true, and I wonder if this is simply an oversight?). That said, this remains the best introduction that I've seen to games managers play (and in which accountants cooperate). More extensive (and less jaunty) than Howard Schilit (Financial Shenanigans). For broader coverage on the limits of accounting, move on to Eccles, etc., "The ValueReporting (sic) Revolution." After the dust settles from the Enron imbroglio, M&C will surely want to do a new edition: here's hoping they keep the same wonderful content, with better focus and analysis.

I had already read one of the authors' previous books, and unfortunately this one didn't break any new ground.

The other book was very good; and perhaps, had I read this one first it would rate higher than three stars. There was quite a bit of repetition, also. Not only from book to book but within this book itself. The chapters can be very redundant. Did I mention the chapters can be very redundant ;-)

I kept waiting for the 'meat' and it never seemed to come. The first half of the book seemed more like filler material. Okay, I thought, when they get to the analysis it will all be worthwhile. Unfortunately, that fell short as well. Want to know their secret to detecting Accounts Receivable and Inventory trouble? Well, it's Days Sales Outstanding and Days Inventory Outstanding.

If those are new concepts for you the book probably rates a 4; if that's old hat then it's more in the 2-3 range.

There are nice examples and a decent chapter in the end on discovering 'tricks' used in the Statement of Cash Flow.

Keep in mind, my bias of reading the other book first; but it now seems they've written the same book three times (though the price of the books keeps coming down - that's good!) w/o advancing the ball too far down the field.

So what is a shareholder to believe? The analysts? The accountants? FASB? SEC? Who has our best interest at heart? And who can you trust anymore? Caveat Emptor. Buyer beware... I began a search to find the best book I could to educate me on corporate creative accounting and this is it. EZ to understand. You don't need to know debits and credits. I know what to look for now when I study 10k's. It's all in this book. Timely. Published just as Enron broke. Lots of companies mentioned, which I won't mention here. You just might be shocked at what you find out. Chapters include 'How the Game is Played', 'Misreported Assets and Liabilities', 'Getting Creative with the Income Statement, 'Earnings Management', 'Problems with Cash Flow Reporting', and many more. Complete with exhibits, charts, footnotes. EZ read. Have to go now and re-evaluate my favorite corporate annual reports!

This is a good book, and comes at a great time. The only problem I have with it is that its missing some important information. For example it does not mention how management can play with "reserves" to increase the company profits. This is quite an important topic to miss, especially since it can be so easilly done by companies and it has been done as discovered in the financial scandals in the last few weeks.

I would suggest you read: "Financial Shenanigans : How to Detect Accounting Gimmicks & Fraud in Financial Reports". It is not quite as long, but covers all the major topics (including playing with reserves) in good detail with good examples (though slightly dated - late 70's to early 90's).

In this well written book, the authors show you that there are far, far more ways of cooking a company's books that you would ever imagine. From not reserving for bad debts, to channel stuffing, to capitalizing operating costs, the ingenuity of executives apparently knows no bounds in their efforts to make things look better than they are.

Just as important, the authors show you where to look in a company's financial statements for signs of the bad practices they describe.

This should be a must read for anyone who does significant investing or who just wants to understand how the Enrons and Adelphias of the world manage to get away with their tricks so long.

The book is fine for those not informed on the topic of financial reports, but those that have some insight on that topic would find it boring and not as informative as expected.
I also found several issues repeated, and other topics just to vague to be of much use.

This book could not have come at a better time, given the Enron debacle shocking investors, accountants, and politicians all over the world. Mulford and Comiskey explain what signs to look for in detecting earnings manipulation. They have gathered advice from expert analysts, CFOs, and CPAs, and provide real-world examples of aggressive and fraudulent financial reports. I have long viewed Mulford and Comiskey
as experts in the field, and they did not let me down in their analysis of creative accounting procedures in The Financial Numbers Game. A great book!

I thought this was going to be a penetrating, incisive look at financial statement chicanery -- instead I got a recap of things I already learned in HOWARD SCHLIT's (better edited, clearer) book.

Most of what is in this book is either a) something you already know or b) material you can get for free on the web (investopedia.com tutorials, etc). Given the fact that the book's authors are well-known names in the field, I expected much more from this offering. Save your money...