Taste Note - Amazon Accounting Best Sellers
Financial Shenanigans: How Accounting Gimmicks Hide in Plain Sight
A Kurums Book Taste review of Financial Shenanigans for anyone who reads statements from companies they do not control - customers, vendors, targets, or investments.
Why this book fits Kurums
Buffett-style analysis assumes the numbers are honest; Schilit's career is built on the ones that were not. The fourth edition catalogues the recurring tricks - from Enron to more recent cases - into a taxonomy of earnings manipulation, cash flow manipulation, and key-metric manipulation, each with the warning signs that preceded the blowup.
For the Kurums Accounting audience this is the professional-skepticism companion to statement literacy: the book that turns 'the auditors signed off' from a comfort into a starting point. Anyone extending credit, valuing an acquisition, or trusting a vendor's stability will use it within a month.
What the book argues
The heart of the book is the taxonomy: seven earnings-manipulation shenanigans (recording revenue too soon, recording bogus revenue, boosting income with one-time gains, shifting current expenses to a later period, employing other techniques to hide expenses, shifting current income to a later period, and shifting future expenses to an earlier period), plus the cash-flow games - classifying operating outflows as investing, selling receivables and calling it operating cash - and the newer key-metrics chapter on massaged non-GAAP measures and vanity KPIs.
Each shenanigan is taught through real cases with the actual filings: what the footnote said, which ratio flagged it, how long the market ignored it. The recurring lesson is that the warning signs were public - receivables growing faster than revenue, deferred revenue shrinking while sales 'grew', serial restructuring charges, cash flow chronically lagging net income. Nobody needed inside information; they needed to read what was filed.
The authors are equally useful on environment: manipulation clusters where governance is weak - founder-dominated boards, serial acquirers whose deals reset the accounting each year, compensation tied to a single metric, and auditors kept close for decades. The checklist chapters turn all of it into a repeatable screen you can run on any counterparty in an afternoon.
Key ideas, translated to your desk
Follow the divergence
Profit is an opinion; collection is a fact. When net income and operating cash flow part ways for more than a couple of quarters, one of them is lying.
Footnotes are the crime scene
Revenue-recognition policies, related-party notes, and change-in-estimate disclosures are where aggressive accounting confesses quietly. Read them before the income statement.
Non-GAAP is a story the company chose
Every adjusted metric excludes something real. Rebuild the bridge from adjusted back to GAAP and ask why each exclusion deserves forgiveness.
Use it at work
- Build a counterparty screen: receivables vs revenue growth, deferred revenue trend, cash flow vs net income, one-time items frequency.
- Before any acquisition, run the target's last three years through the seven-shenanigan checklist.
- Re-underwrite your largest customer's credit limit using their filings, not their payment history alone.
- Train the finance team with one case chapter per month - the pattern recognition compounds.
Read it if
- You extend credit, invest in, or acquire companies on the strength of their reported numbers.
- You want professional skepticism turned into a concrete checklist.
- You enjoyed the Buffett statements book and want its adversarial twin.
You can skip it if
- You never analyze external companies - internal reporting has different failure modes.
- You want accounting standards instruction; this assumes you know the rules being bent.
- Case-heavy American examples tire you, though the mechanics are jurisdiction-proof.
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