Wednesday, January 31, 2007

Common Clues Of Financial Statement Manipulation

Teaching accounting in a finance class is always difficult, but article like this will be of interest to the students and a good way for all to get some practical applications of what to be aware of when examining financial statements.
From Investopedia:
Common Clues Of Financial Statement Manipulation:
"One of the most prevalent approaches to corporate accounting is to omit the bad and exaggerate the good. There are a number of subjective figures in any financial report that accountants can tweak. For example, a company may choose to exclude costs unrelated to its core operations when figuring its operating cash basis - say an acquisition of another company or purchasing investments - but will still include the revenue from the unrelated ventures when calculating their quarterly earnings. Fortunately, companies have to break down the figures, thus dispersing the smoke and mirrors, but if you don't look beyond a few main figures in a company's financials you won't catch it."

1 comment:

Cameron Nichol said...

Good Article. We need more workplace hooks like this to enliven accounting lectures.
I've sent the link out to the department.