Cook The Books

What Does Cook The Books Mean?
A buzzword describing fraudulent activities performed by corporations in order to falsify their financial statements. Typically, cooking the books involves augmenting financial data to yield previously non-existent earnings.

Examples of techniques used to cook the books involve accelerating revenues, delaying expenses, manipulating pension plans and implementing synthetic leases.

Investopedia explains Cook The Books
During the first couple of years of the new millennium, large Fortune 500 companies such as Enron and WorldCom were found to have been cooking the books to improve their financial figures. The resulting scandals gave investors and regulators a rude awakening concerning the reality that companies were hiding the ugly truth between the lines of financial data.

In order to rally investor confidence, the Sarbanes-Oxley Act of 2002 was created. This act of Congress created policies to protect investors against future incidents of corporate fraud.

Filed Under: Buzz Words

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Related Links

Cooking The Books 101 - To spot the signs of earnings manipulation, you need to know the different ways companies can inflate their figures.
Putting Management Under The Microscope - We tell you where to find the telltale signs of corporate misdeeds.
How The Sarbanes-Oxley Era Affected IPOs - After the infamous collapse of companies like Tyco, Enron and WorldCom, the government responded to try and prevent it from happening again.
Introduction To Fundamental Analysis - Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
Off-Balance-Sheet Entities: The Good, The Bad And The Ugly - This article defines some typical off-balance-sheet items and discusses when they are justified and when they are misleading.
To whom was the term "corporate kleptocracy" first applied?

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