Financial Accounting for Managers, 3rd Edition

15

Financial Shenanigans

CHAPTER OBJECTIVES

This chapter will help the readers to:

• Understand the regulatory framework in place to ensure that the financial statements are reliable.
• Appreciate the accounting areas where managerial discretion is available.
• Develop familiarity with the common areas of creative accounting.
• Dissect some of the infamous accounting scams of recent times.
• Apply techniques to detect financial shenanigans.
• Appreciate the need for ethics in accounting.

15.1 INTRODUCTION

As discussed in Chapter 1, the accounting information is prepared by the management and used by a large number of stakeholders for taking economic decisions. The end result of the accounting cycle, i.e., the three key financial statements—balance ...