Financial Shenanigans
by Howard M. Schilit · first published 2002
82% recommend18% neutral
Why HN recommends it
Catalogs common accounting tricks companies use to make results look better than they are, with many historical examples; useful for investors, analysts, and anyone wanting to spot fraud in financial statements.
Summarised by Claude from recommending comments
Techniques to uncover and avoid accounting frauds and scamsInflated profits . . . Suspicious write-offs . . . Shifted expenses . . . These and other dubious financial maneuvers have taken on a contemporary twist as companies pull out the stops in seeking to satisfy Wall Street. Financial Shenanigans pulls back the curtain on the current climate of accounting fraud. It presents tools that anyone who is potentially affected by misleading business valuations--from investors and lenders to managers and auditors--can use to research and read financial reports, and to identify early warning signs of
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For those who are interested in the accounting side, I highly recommend Financial Shenanigans by Howard Schilit [1]. If you don't have an accounting background, all you need to get value out of this book is a basic understanding of the double entry accounting method, and understand the four financial…
on “How to Detect Business Fraud” ↗…read this, all of it, except perhaps most of the exhibits: Most recent Costco annual report (10-k). * Berkshire Hathaway annual letters, Transcripts from Berkshire annual meetings * Great follow-up: Financial Shenanigans, Fourth Edition: How to Detect Accounting Gimmicks and Fraud in Financial Reports (Schilit, Howard, Perler, Jeremy, Engelhart, Yoni, McGraw-Hill Education) * Absolute classic (but needs to be updated):…
on “Annual Letter to Berkshire Shareholders (2019) [pdf]” ↗You might enjoy a book called Financial Shenanigans (https://www.amazon.com/Financial-Shenanigans-Fourth-Accounti...). It's essentially examples of detective stories based on financial statements.
on “Show HN: Free 30-year financial statements visualization” ↗> I've heard of companies bringing revenue forward but I've never heard of postponing revenue to a later quarter. Schilit et al on Financial Shenanigans is instructive here. Management might try playing this game to reach future bonuses staked to earnings targets. Microsoft did it in the late 90s with unearned revenue reporting as a way to avoid bringing…
on “SEC charges VMware with misleading investors by obscuring financial performance” ↗I'm currently reading a book called "Financial Shenanigans" and I'd highly recommend it. It's about account shenanigans companies do to make their business seem more profitable than it really is. Not sure if this applies here but interestingly there's a section…
on “How one family built Qualtrics to an $8B exit” ↗I have read and own the recommended book at the end, Financial Shenanigans. Anyone who has ever had to measure up to some imperfect KPI will find it relatable. My way of personally looking for fraud is to look at incentives. What might this person stand to gain if I take this…
on “No general method to detect fraud” ↗…valuation Aswath Damodaran has a pretty good book that can be combined with McKinsey's book on the subject. Beyond that, some more advanced accounting books, especially forensic stuff is great to know. Financial Shenanigans and Creative Cash Flow Reporting are where I'd start with that. To be really good you also need to read quite a bit about psychology/mental models. Look for speeches/lectures by Charlie Munger. Books…
on “Ask HN: Steady 4-5% on $5 million?” ↗…want a quick overview of some of the multiples and what they mean for finance/investing, I'd recommend "Visual Finance". The most fascinating book that I've read in the accounting/finance domain is "Financial Shenanigans" which outline different ways to manipulate financial statements. It would be my recommended goto book for the field of financial fraud. For personal investing, my goto is "Quantitative Value" which…
on “Ask HN: Which book can attract anyone towards your field of study?” ↗Not quite what I expected, the recommendations are more high level. For a more "operational" perspective, I highly recommend "Financial Shenanigans" which covers different ways to manipulate financial statements. "Quality of Earnings" is a good complement to that.
on “Books to read to understand financial crime” ↗…technology where their truck couldn't even move under its own power so they filmed it rolling down a gentle slope). For anyone wanting to get into the weeds about detecting accounting fraud, the book "Financial Shenanigans" has lots of historical examples of ways company executives have cooked the books to make their public company financial statements appear more appealing to investors than they actually are.
on “Ex-CEO, ex-CFO of bankrupt AI company charged with fraud” ↗I want to read more books like "Financial Shenanigans, Fourth Edition: How to Detect Accounting Gimmicks and Fraud in Financial Reports". However, neither the book nor the first author are listed in your database. I couldn't find any narrow topic to match…
on “Show HN: Personalized book recommendations with Librarian AI” ↗…being artificially low? When expenses are misrepresented, then we are in the territory of security fraud. Howard Schilit writes about the options backdating scandal from this perspective in his book "Financial Shenanigans: How to Detect Accounting Gimmicks and Fraud in Financial Reports". > Most shenanigans discussed in this book share a common theme: company executives use accounting gimmicks to show impressive results…
on “Why I did not go to jail (2014)” ↗…Python 3 Object-Oriented Programming by Dusty Phillips Currently reading: Stalingrad by Vasily Grossman The Bitcoin Standard: The Decentralized Alternative to Central Banking by Saifedean Ammous Financial Shenanigans by Howard M. Schilit Up next: Life and Fate by Vasily Grossman These Truths by Jill Lepore Understanding Machine Learning: From Theory to Algorithms by Shalev Shwartz and Ben David
on “Ask HN: Which book do you want to read next?” ↗…give you the opportunity to know who is being aggressive with their accounting. And if they are being aggressive you should probably stay away. There are a ton of books out there on forensic accounting (Financial Shenanigans, Creative Cash Flow Reporting, Quality of Earnings, Financial Fine Print -- Along with changes to GAAP and IFRS) where if you have read all of them you should be able to pick out weird issues with accounting.…
on “The Stock Market Is Still for Suckers” ↗