105319: Financial Shenanigans Study Guide
Reading assignments are for “Financial Shenanigans 4th Edition.”
1) 25 Years of Shenanigans
Reading Assignment: Preface – Chapter 1 <<>> Review Questions: # 1-4
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 Questions: # 5-6
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: # 7-10
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: # 11-13
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: # 14-15
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: # 16-19
The learning objectives for this lesson are to gain an understanding of:
- Excessively 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: # 20-22
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: # 23-24
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: # 25-28
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: # 29-32
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 Question: # 33
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: # 34-36
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: #37-38
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: # 39-40
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 Question: # 41
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 Question: # 42
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 Question: # 43
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 Question: # 44
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 Question: # 45
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