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Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports, 3rd Edition Hardcover – May 5, 2010


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Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports, 3rd Edition + Quality of Earnings + Creative Cash Flow Reporting: Uncovering Sustainable Financial Performance
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Product Details

  • Hardcover: 304 pages
  • Publisher: McGraw-Hill; 3rd edition (May 5, 2010)
  • Language: English
  • ISBN-10: 0071703071
  • ISBN-13: 978-0071703079
  • Product Dimensions: 5.9 x 1 x 9.5 inches
  • Shipping Weight: 1.3 pounds (View shipping rates and policies)
  • Average Customer Review: 4.5 out of 5 stars  See all reviews (35 customer reviews)
  • Amazon Best Sellers Rank: #34,280 in Books (See Top 100 in Books)

Editorial Reviews

About the Author

Howard Schilit, Ph.D., CPA, is the founder and chief executive officer of Schilit Forensics LLC. Dr. Schilit is a pioneer in the field of detecting accounting tricks in corporate financial reports that mislead investors. Howard was the founder and CEO of CFRA, a global forensic accounting research organization. He has been a leading spokesman before the US Congress, the SEC, and global media outlets about the causes and early warning signs of accounting tricks in public filings. Dr. Schilit began his career as an Associate Professor of Accounting at American University and continues to teach and lecture all over the world. Dr. Schilit holds his doctorate in Accounting from the University of Maryland.
Jeremy Perler, CFA, CPA, is the Director of Research at Schilit Forensics and co-author of Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports (3rd edition, 2010). Previously, Jeremy served as the in-house Forensic Accounting Analyst for CoatueManagement, a long/short equity hedge fund; Director of Research for CFRA; and auditor for PricewaterhouseCoopers. In addition, Mr. Perler serves on the FASB's Financial Accounting Standards Advisory Council (FASAC) as a representative of the Investor Community. Jeremy holds a Master of Accounting and a BBA from the University of Michigan Ross School of Business.

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Customer Reviews

Easy read for a complex topic.
Anurag Gupta
You will get the most out of it if you read it when you are well rested and ready to concentrate.
Houman Tamaddon
I highly recommend all serious investors read this book before looking to invest for themselves.
Christian Williams

Most Helpful Customer Reviews

63 of 63 people found the following review helpful By Erik T. Nelson on February 1, 2011
Format: Hardcover
I should begin by saying that I completely agree with the previous five star reviews. This is a magnificent book, and the second edition had a great influence on my investing. All serious investors should read this.
I would like to draw attention though, to the changes made since the second edition. The second edition described seven basic shenanigans which, for the most part, manipulated earnings and revenue, as these are the headline numbers that the bulk of investors look at. The third edition covers the same shenanigans, though the sections have been re-written, and the examples have been changed and updated. The third edition adds sections on shenanigans to manipulate cash flow numbers (yes, this can be done) and metrics that investors use frequently. The new sections are worth the upgrade to me, though if you read widely in the area, you won't find much new. Mulford and Comiskey's Creative Cash Flow Reporting, for example, covers the same material as the section on cash flow.
Those who haven't read the second edition should be aware that portions of the second edition have been eliminated. The sections on "Problem Areas" and "Looking Back . . . Looking Forward" are gone, but the topics they deal with have either been absorbed into the rest of the text or can be dropped without great consequence. The section on "Techniques for Detecting Shenanigans" has also been dropped, and I believe that this is unfortunate. While some readers may already be familiar with common-size analysis, for example, many investors don't have formal education in accounting and could use the explanation and examples.
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35 of 37 people found the following review helpful By Book Worm on October 4, 2010
Format: Hardcover Verified Purchase
As a financial accountant, I have special appreciation for "Financial Shenanigans" by Schilit and Perler. Like the preface mentions, this book truly provides the "post-mortem analysis" it promises. It clearly narrates the most infamous financial reporting failures in history (US, Europe, & Asia), and the lessons such fraudulent mistakes offer those who wish to learn. Not only does it serve as a quick reference for all possible fraudulent methods to date, but also as a review of core financial accounting principles (US GAAP) and basic performance ratio calculations.

In addition, it is intelligently written, and easy to follow and comprehend. More specifically, it also employs humor in a smart, witty manner. It does a great job of drawing in readers who appreciate reading up-to-date, practical accounting/finance material they can apply to their professions (outside of academia). Best of all, it isn't dry, but engaging!

I expect my copy will become worn and dog-eared within a short period of time, as this book has become my most trusted coworker and best companion at the office. I am looking forward to following these two authors and reading more of their upcoming work.

My personal opinion, of course, but perhaps more MBA's and senior executives ought to read this book and educate themselves! We're on to you, C-suite!

Brilliant, useful, and insightful! Well done! 10 out of five stars!
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10 of 10 people found the following review helpful By ghutch on December 7, 2010
Format: Hardcover Verified Purchase
I really enjoyed reading Financial Shenanigans. I am an investor not an accountant but I understand basic financial statements and I found this book extremely valuable if you want to avoid the companies that use aggressive or even fraudulent accounting to hit their numbers. On top of being educational, I really found all the specific examples, and there were dozens and dozens and dozens of them, to be a really interesting read (if financial statements can be interesting?).
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19 of 22 people found the following review helpful By Ratatosk on May 4, 2011
Format: Hardcover
This book lists various types of accounting frauds and gives real-world examples as well as suggestions on how to detect fraud.

My issues with the book are:

The authors frequently draw comparisons to unrelated things and try to turn it into something amusing. Warren Buffett does that all the time - only he does it well. Here it is just confusing. The book also has a sensationalist style. It is also very repetitious. It has surprisingly few financial statements and instead gives textual descriptions of fraudulent accounting. This also means the suggestions for detecting fraud are vague.

Strangely, the book often makes nonsensical comparisons of financial data, e.g. on p. 120 it compares the capitalized costs Per Share of two companies, concluding that one of them uses more conservative accounting. But without listing the cost as a percentage of revenue (or another meaningful relation) it simply cannot be compared across companies. Using the per-share numbers is like saying Microsoft is a less valuable company than Amazon because MSFT is trading at $26 and AMZN at $180, which is nonsense.

Nevertheless, there are some good warnings in this book and I wish the authors would write a better edition.

PS: This review is for the 3rd edition.
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21 of 25 people found the following review helpful By nyg91 on August 27, 2010
Format: Hardcover Verified Purchase
One of the best books I have ever read. This book provides you with all the defenses to protect against agressive and fraudulent accounting. Most interesting part was to learn how easily management can manipulate CFFO. It has been traditionally believed that this number is reliable because it is harder to manipulate, in fact analysts don't even check its quality like they do for earnings. Skepticism is a powerful tool.
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