Howard Schilit develops what he terms the seven accounting shenanigans:

For each shenanigan, he defines the term, explains managers' motivations to carry it out, describes how they can implement the shenanigan, and illustrates the concept with several real world examples.
 
The reader is struck with the awesome feeling that managers have so many ways in which they can deceive users of financial statements. Worse, the reader feels the impact of so many instances in which managers actually employed these duplicitous methods. How foolish we are to believe what managers tell us!
 
The only shortcoming of the book is its contention that financial statement users can detect accounting fraud easily. This is a stretch, for I find it challenging to distinguish between fraud and legitimate financial difficulties or other situations. For example, high growth in receivables and inventories accompanies certain types of accounting fraud, but it also shows up when a corporation experiences high growth. One has to do more detective work than merely examining the growth rate of receivables and inventories to assess whether fraud exists.
 
Nonetheless, Schilit has written an engaging book that I recommend for investors and professional advisers. I would also recommend it to managers, as long as they don't use it as a cook book.

J. EDWARD KETZ is associate professor of accounting in Penn State's Smeal College of Business Administration. Check out his column, where you'll find more articles on controversial, cutting-edge topics.