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Financial Statements by Thomas Ittelson

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Chapter 15. Cooking the Books

The vast majority of audited financial statements are prepared fairly. They are assembled in accordance with GAAP and evidence sound fiscal controls and integrity of management. However, sometimes this is not the case and financial fraud is committed: illegal payments made, assets misused, losses concealed, expenses under-reported, revenue over-recorded and so forth.

The New Shorter Oxford English Dictionary has two definitions for the noun “cook.” The first describes a person in the white hat behind the counter. The second definition is more appropriate to our discussion: “A person who falsifies or concocts something.” So, the first cook cooks your lunch; the second cook eats your lunch.

“Cooking the books” means ...

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