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You are here: Home Course materials CPE course study guides 105319: Financial Shenanigans Study Guide

105319: Financial Shenanigans Study Guide

The study guide is provided to guide you through the course material in a step by step format.

Reading assignments are for "Financial Shenanigans 4th Edition."

1) 25 Years of Shenanigans

Reading Assignment: Chapter 1 <<>> Review Question: # 

The learning objectives for this lesson are to gain an understanding of:

  • History of financial accounting fraud
  • Significant accounting frauds that have occurred in the last 25 years
  • Overview of the types of accounting fraud

2)  Just Touch Up the X-Rays

Reading Assignment: Chapters 2  <<>> Review Question: # 

The learning objectives for this lesson are to gain an understanding of:

  • Definition of financial shenanigans
  • Five broad types of financial shenanigans
  • Importance of checks and balances

3)  Recording Revenue Too Soon

Reading Assignment: Chapter 3 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of:

  • How many days are in a month :-)
  • Techniques used to record revenue too soon

4)  Recording Bogus Revenue

Reading Assignment: Chapter 4 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of:

  • Techniques used to record bogus revenue
  • Warning signs for investors to spot these shenanigans

5)  Boosting Income Using One-Time or Unsustainable Activities

Reading Assignment: Chapter 5 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of:

  • Boosting income using one-time events
  • Boosting income through misleading classifications 

6)  Shifting Current Expenses to a Later Period

Reading Assignment: Chapter 6 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of:

  • FExcessively capitalizing normal operating expenses
  • Amortizing costs too slowly
  • Falling to write down assets with impaired value
  • Failing to record expenses for uncollectible receivables and devalued investments

7)  Employing Other Techniques to Hide Expenses or Losses

Reading Assignment: Chapter 7 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of:

  • Failing to record an expense at the appropriate amount from a current transaction
  • Recording inappropriately low expenses by using aggressive accounting assumptions
  • Reducing expenses by releasing reserves from previous charges

8)  Shifting Current Income to a Later Period

Reading Assignment: Chapter 8 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of:

  • Creating reserves and releasing them into income in a later period
  • Smoothing income by improperly accounting for derivatives
  • Creating reserves in conjunction with an acquisition and releasing them into income in a later period
  • Recording current period sales in a later period 

9)  Shifting Future Expenses to the Current Period

Reading Assignment: Chapter 9 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of:

  • Improperly writing off assets in the current period to avoid expenses in a future period
  • Improperly recording charges to establish reserves used to reduce future expenses

10)  Shifting Financing Cash Inflows to the Operationg Section

Reading Assignment: Chapter 10 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of:

  • Recording bogus CFFO from a normal bank borrowing
  • Boosting CFFO by selling receivables before the collection date
  • Inflating CFFO by faking the sale of receivables  

11)  Moving Operating Cash Outflows to Other Sections

Reading Assignment: Chapter 11 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of:

  • Inflating CFFO with boomerang transactions
  • Improperly capitalizing normal operating costs
  • Recording the purchase of inventory as an investing outflow
  • Shifting operating cash outflows off the Statement of Cash Flows 

12)  Boosting Operating Cash Flow Using Unsustainable Activities

Reading Assignment: Chapter 12 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of:

  • Boosting CFFO by paying vendors more slowly
  • Boosting CFFO by collecting from customers more quickly
  • Boosting CFFO by purchasing less inventory
  • Boosting CFFO with one-time benefits 

13)  Showcasing Misleading Metrics That Overstate Performance

Reading Assignment: Chapter 13 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of:

  • Highlighting a misleading metric as a surrogate for revenue
  • Highlighting a misleading metric as a surrogate for earnings
  • Highlighting a misleading metric as a surrogate for cash flow

14)  Distorting Balance Sheet Metrics to Avoid Showing Deterioration

Reading Assignment: Chapter 14 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of:

  • Distorting Accounts Receivable metrics to hide revenue problems
  • Distorting inventory metrics to hide profitability problems
  • Distorting financial asset metrics to hide impairment problems
  • Distorting debt metrics to hide liquidity problems 

15)  Artificially Boosting Revenue and Earnings

Reading Assignment: Chapter 15 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of:

  • Inflating profits through tricks at a target company before deal closes
  • Inflating profits by hiding losses that deal closing
  • Creating dubious new revenue streams after closing
  • Inflating profits by releasing suspicious reserves either before or just after closing 

16)  Inflating Reported Cash Flow

Reading Assignment: Chapter 16 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of:

  • Inheriting operating inflows in a normal business acquisition
  • Acquiring contracts are customers rather than developing them internally
  • Boosting CFFO by creatively structuring the sale of the business 

17)  Manipulating Key Metrics

Reading Assignment: Chapter 17 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of:

  • Inflating sales growth at the core business 

18)  The Unraveling

Reading Assignment: Chapter 18 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of:

Three companies that employed a variety of shenanigans to hide business problems from investors but eventually imploded:

  • Hertz Global holdings
  • Toshiba Corporation
  • Valeant Pharmaceuticals  

19)  The Forensic Mindset

Reading Assignment: Chapter 19 <<>> Review Questions: 

The learning objectives for this lesson are to gain an understanding of the components of the forensic mindset:

  • Skepticism
  • Pay close attention to changes
  • See if business problems are being covered up
  • Pay attention to corporate culture
  • Never blindly adopt the company’s profitability framework
  • Examine how executives are compensated
  • Look at financial disclosures
  • Every shot counts
  • Examine patterns of behavior
  • Never stop learning

 

 

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