This third edition of Financial Shenanigans updates investors with lessons gleaned from examining many of the deceptive financial reporting practices employed during the last decade. Since we published the original edition of Financial Shenanigans in 1993, corporate management has continued to concoct new ways to manipulate its financial reports in order to inflate company stock prices and other compensation-related metrics. And, looking to the future, as management works to create newfangled tricks, diligent investors must continue to learn to detect new financial shenanigans.
The preface of this book quoted a proverb from the Bible (Ecclesiastes 1:9):
What has been will be again, what has been done will be done again; there is nothing new under the sun.
Corporate financial scandals have been around as long as corporations and investors themselves. Dishonest management has preyed on unsuspecting investors, and it is time for such investors to redouble their efforts to be alert for such financial shenanigans so that they can protect themselves.
Since shenanigans at their most basic level represent management’s attempt to put a positive spin on a company’s financial performance and economic health, our universal message is that investors should assume that the urge to exaggerate the positive and hide the negative will never disappear. And where temptation exists, shenanigans often will follow.
Financial Shenanigans Third Edition
by Howard M. Schilit & Jeremy Perler