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Book Review
Financial Shenanigans 2nd Edition
How to Detect Accounting Gimmicks and Fraud in Financial Reports
By Howard Schilit
Recent events in the financial world have turned the accounting profession topsy-turvy. Frauds, scandals and mismanagement dominated the headlines for months. The U.S. Securities and Exchange Commission and the U.S. Congress enacted legislation mandating greater oversight of the accounting profession. Behind it all is the question where were the auditors? Could auditors have detected the complex scams and schemes at the root of the biggest financial frauds in modern history? Howard Schilit, President of the Center for Financial Research and Analysis details techniques and methods in his new book Financial Shenanigans that, if applied by financial professionals, could have detected those frauds and accounting anomalies. The book starts out by setting the foundation and looking at some past frauds. Section titles such as "Perhaps Too Cozy with the Auditors" set the stage. He then goes on to Part Two of the book covering the Seven Shenanigans. Having an accounting background really helps with reading Part Two of the book. The author's presentation for this section is not surprising given his accounting background. In fact Howard Schilit was one of my accounting professors at the American University when I was working on my masters degree. Part Three of the book covers techniques for detecting shenanigans. There is an excellent appendix tutorial on understanding the basics of financial reporting as well as a comprehensive checklist of warning signs for various financial statements. The book is a must read for financial statement auditors as well as individuals investors with little or no background in financial analysis. If I had this book before, perhaps I would not have bought Boston Chicken. Congratulations Professor Schilit on a job well done.
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