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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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About the Author
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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Top Customer Reviews
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.Read more ›
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!
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.
The second edition of this book does a great job of highlighting indicia that are correlated with firms which have cooked the books in the past. And it is a good read. If a fourth edition is written, let's hope the fire of the previous version is rekindled.
As an aside, the subtitle oversells the book--after all, an outsider never is sure whether something is fraud.
Third edition, only so-so; a devolution in something that was quite good. Second edition, lots of meat; go buy that edition instead.
Most Recent Customer Reviews
If you want to understand financial shenanigans, this is the book for you. I highly recommend it. That is all.Published 2 months ago by Michael Zwerner
I am an accounting student. This book was a great basis for my audit class project. I have read a few books on financial fraud and was not able to find as much detailed information... Read morePublished 2 months ago by Salomeya
I personally loved this book for the following reasons:
Very clear graphics to follow.
Very clear break down of how companies manage money inappropriately. Read more
Good read but absolutely not enough for those who really want to invest and manage their own money themselves in financial markets.Published 7 months ago by Basel
This was a school textbook that we never actually used but it was a great read nonethelessPublished 9 months ago by A. O'C
As one who invests for long term reliable income using the dividends paid by publicly traded stocks, I find the content of this book good and most of it useful, at least at the... Read morePublished 9 months ago by Lynn C. Miller