CHAPTER 1 The Adversarial Nature of Financial Reporting
1. Howard M. Schilit, Financial Shenanigans: How to Detect Accounting Gimmicks and Fraud in Financial Reports (New York: McGraw Hill, 1993), 153.
2. Although this book focuses on for-profit companies, nonprofit companies and governmental entities also produce financial statements. Readers should not presume that those entities invariably eschew reporting trickery. Like their for-profit counterparts, nonprofit organizations seek to raise capital. They have incentives to portray their financial positions in as favorable a light as possible, when trying to borrow or to demonstrate their financial viability to providers of grants. On the other hand, nonprofits sometimes strive to make themselves appear less flush than they really are, to impress on donors the urgency of their appeal for funds. Governmental units sometimes resort to disingenuous reporting to avoid political fallout from the consequences of unsound fiscal policies. Anticapitalist ideologues cannot truthfully contend that the profit motive alone leads to devious financial reporting.
3. Stuart Elliott, “Advertising,” New York Times, November 11, 2002, C10.
4. Vanessa O’Connell and Suzanne Vranica, “Interpublic Says SEC Seeks Data Related to Its Bookkeeping Errors,” Wall Street Journal, November 20, 2002, A3.
5. Nick Wingfield and Paul Beckett, “MicroStrategy, Results Restated, Is MacroLoser,” Wall Street Journal, March 21, 2000, B1, B4.
6. Floyd Norris, “A ...