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Summary: Great Book For Learning About Financial Trickery
Review: "Financial Shenanigans: How To Detect Accounting Gimmicks & Fraud In Financial Reports" by Howard M. Schilit should be read by all serious, long-term, stock investors.Schilit writes: "Financial shenanigans are actions or omissions intended to hide or distort the real financial performance or financial condition of an entity. They range from minor deceptions (such as failing to clearly segregate operating from nonoperating gains and losses) to more serious misapplications of accounting principles (such as failing to write off worthless assets; they also include fraudulent behavior, such as the recording of fictitious revenue to overstate the real financial performance). Since management is clever about hiding its tricks, investors and others must be alert for signs of shenanigans." Schilit goes on to discuss a wide range of financial shenanigans which devalue the investment worth of a company. The shenanigans range from "recording revenue when important uncertainties exist" to "failing to accrue expected or contingent liabilities." Each financial shenanigan is discussed in detail, and a real-world example of a public company affected by the shenanigan is given. Stock-versus-price charts are also given to show the stock-price behavior of the company's stock following the disclosure of the shenanigan (usually the stock price drops like a rock after accounting trickery is discovered). For example, Tie Communications stock fell from a high of $40.38 per share in 1983 (five years after going IPO) to a low of $0.31 per share by 1990. The 1983 stated profits of the company were "given a shot in the arm by the sale of some investments at a substantial gain...." Schilit goes on to explain that some companies use the sale of appreciated assets to hide losses from normal business operations and make the company appear more profitable than it really is. "Financial Shenanigans: How To Detect Accounting Gimmicks & Fraud In Financial Reports" is very easy to read, unlike many books which deal with the topic of accounting. Investors will read through this book rather quickly and that is a tribute to Schilit's writing. Yet, most investors will learn a great deal about financial reporting. Most importantly, readers will learn how to protect themselves as investors. In addition to shenanigan busting, Schilit gives an excellent tutorial to help readers understand the basics of financial reporting and accounting. Plus, he does an excellent job of pointing out the logic of sound financial reporting. For example, Schilit writes various "guiding principles" throughout the book to help the reader, such as "Guiding Principle: An enterprise should capitalize costs incurred that produce a future benefit and expense those that produce no such benefit." Schilit explains that capitalizing costs which have no future benefit is one way to enhance current earnings at the expense of future earnings. Shilit discusses De Laurentiis Entertainment, a producer and distributor of motion pictures, as an example. In 1987, the SEC charged Laurentiis Entertainment with improperly capitalizing expenses which should have been charged against current earnings. Schilit's stock chart shows that shares of DEG fell from a high of $19.25 in 1986 to a low of $0.06 in 1989. Serious, long-term investors don't want to hold stock in companies such as De Laurentiis Entertainment in 1987 and Tie Communications in 1983. Schilit gives a list of fifty-two techniques to help the investor spot financial shenanigans in advance when evaluating a company for investment. These techniques range from looking for management incentives which encourage false reporting, to not being fooled by profits enhanced by retiring debt, to watching for worthless investments the company is making. Examining these factors together should help the investor evaluate the overall honesty and viability of the company long-term. The investor will gain insight as to whether the company is being conservative in its accounting or being too aggressive in its accounting. I highly recommend "Financial Shenanigans" to all investors who buy individual stocks and who focus upon buying solid businesses. The book will help weed out the businesses which are only reporting "accounting" profits for the temporary benefit of management. Peter Hupalo, Author of "Becoming An Investor"
Rating: 
Summary: Spinning Up - Getting inside Accounting Issues
Review: As a non-CPA, non-Auditor, I haven't spent my career learning to see through the ingenious little deceits that accounting professionals have dreamed up over the years.
"Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports, Second Edition" by Howard M. Schilit provides an excellent 101 on basic tactics that have scarred public companies in recent years. Schilit makes the issues very accessible for the non-accountant, and provides real world examples that tickle the long-term recall.
Looking at seven basic shenanigans, Schilit walks the reader through the logic, the implications, and how to root out these issues:
1) Recording revenue too soon,
2) Recording bogus revenue,
3) Boosting income with one-time gains,
4) Shifting current expenses to a later or earlier period,
5) Failing to record or improperly reducing liabilities,
6) Shifting current revenue to a later period, and
7) Shifting future expenses to the current period as a special charge
An excellent primer for new financial managers.
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Summary: Packed with Knowledge!
Review: Author Howard Schilit writes in surprisingly plain English, and provides the reader with a toolkit to determine what's so rotten in Denmark - or on Wall Street. You don't have to be an experienced reader of financial reports to learn a lot from this book. Schilit offers more than theory; he provides specific examples and case studies. Learn about the manager who reduced future expenses by purchasing $12 million worth of advance postage metering at the end of the year. Find out how "Chainsaw Al" Dunlop drove up the price of Sunbeam stock by creating a $35 million reserve, all while laying off 11,000 employees. Learn the inside story of how Enron became the poster child for corporate wrongdoing. We highly recommends this book to independent investors, and anyone else who needs to understand how unethical execs cook the books. It may not save you from losing a bundle, but at least you won't feel like you're in a battle of wits and devoid of weaponry.
Rating: 
Summary: A good read but..
Review: Financial Shenanigans is written apparently with a popular audience in mind, but you really ought to have some previous experience in reading financial statements. Individual investors should should be practiced at researching firms with at least the resources available free/cheap on the web. The book covers the same disasters as 2 or 3 others I've read, but is more subjective/judgemental in tone and less thorough. It also tends to sound like an promo for the author's business (research institute), where you get absolutely nothing for less than $300 (which works out to about $100/pg I think for reports.) The book is also marred for non-professional readers by careless editing than left typos, misplaced phrases. A number of the tables for example financial statement analysis are riddled with what I imagine might be a spreadsheet font/formating problem that truncates 4 digit numbers to the left 3 digits. Most can be spotted by the form "x,xx" with the comma separator the clue, but three digit numbers chopped to two aren't so obvious, and to get the numbers to add up correctly you have to do a little tinkering to figure out which are missing a digit. Not critical, but very annoying, and doesn't look good for a book about meticulous ferreting out of subtle accounting ploys. Still, it may help improve do-it-yourself research & analysis.
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Summary: Howard Schilit is the best in the business
Review: Financial Shenanigans was required reading at the first hedge fund that I worked at. I now keep a copy in my office and use it for reference. This book is written in simple language that allows the novice to benefit from the insights of a true industry professional. Many mutual funds and hedge funds subscribe to Howard's institutional research service because of the quality of his work. This book helps level the playing field for individual investors. It helps by explaining medthods that investment professionals use to find corporations that mask poor financial performance.
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Summary: CREATIVE ACCOUNTING 101
Review: FINANCIAL SHENNANIGANS How to Detect Accounting Gimmicks & Fraud in Financial Reports 2nd Edition - Howard Schilit Former SEC Chairman Arthur Levitt once noted that the investment markets exist through the "grace" of investors. That grace is a fragile trust easily undermined by intentional distortions of the financial performance of publicly reporting companies. Those distortions that erode investor confidence are author Howard Schilit's 'Shenanigans'. The infractions described range from benign to aggressive to outright fraudulent and Schilit is always ready with the specifics of companies who have demonstrated an excess of creativity in their arithmetic. It should be said that the information in this book is very accessible to the non-accountant. This is an illuminating read. A brief accounting tutorial in the Appendix is almost worth the price of admission. Serious investors should read this book. The "seven financial shenanigans" Schilit discusses at length are painfully familiar to portfolio owners. They are clearly explained and amply exampled. Reading this book may or may not provide an investor with the expertise to prevent a future mistake, but it will certainly add to an appreciation of the seriousness of issues as they surface in the financial media.
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Summary: Valuable Advice
Review: Had you read this, you never would have bought ENRON!
Rating: 
Summary: Not sure who needs this book
Review: I bought this book with some anticipation, but was very disappointed after reading it. I am not a financial expert, but have a reasonable understanding of finance and accounting. There was nothing in this book that I didn't learn in my intro accounting classes, so I am not sure who this book is aimed at. If you know so little about accounting that you need the very simple tidbits in this book, you probably shouldn't be buying stocks... Examples such as fiddling with inventory accounting methods, recognizing revenue, etc. should be old hat to anyone who reads Fortune or the WSJ. Perhaps the best audience for the book is the college freshman taking an intro accounting course, and who wants to learn a little more about how it works in the real world.
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Summary: Necessary Read for Any Serious Investor..
Review: Is this book perfect? Of course not. But, it is a well-written, useful guide for anyone who wants to understand how companies continually mislead investors by using aggressive and sometimes fraudulant accounting. Schilit gives us tons of examples of different kinds of crooked accounting including improper capitalization of expenses, revenue acceleration, receivables collection, off-balance sheet debt, etc and reviews many classic accounting frauds like Boston Chicken, Enron, Rite-Aid, Informix, and MicroStrategy. This stuff isn't the good stuff that the CEO always talks about, but rather the fine print in tedious, long 10Ks and other SEC documents. While he is very brief and doesn't always cover all of the bases, he does more than enough to educate 99.999% of investors and make them smarter and more educated in the long-run. After reading this book, you will be a cynical investor and not take anything at face value. It's strange, but most investors never seem to learn from the same accounting tricks. One person said that this book is appropriate for a college freshman, which is absurd. You do need to know the basics before you delve into this book. Unless you have been investing for 20 years and know every single accounting fraud, this book is clearly worthwhile. As someone who works in the hedge fund business and remembers college, I can say with confidence that Schilit's book is a must-read and is great as a learning resource.
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Summary: Im now rich
Review: Mr. Schilit's book is the greatest financial work of our time. I personally have become extremely wealthy and well known using only strategies and tidbits i found in this book. Plus his daughter is hot. Everybody should buy this book, and the new Kitchen Aid Blender, because it makes the best smoothies. I love bananas. Buy this book! Actually i hate bananas. But im rich because of this book, so if you are a person looking to gain some monetary value to score with the chicks, learn how to do that from Mr. Howie Schilit. From Alayamba. Kuala Lumpur Football Rocks!
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