University of Maryland’s Robert H. Smith School of Business alumnus Howard Schilit, PhD ’81, CEO of Schilit Forensics and co-author of Financial Shenanigans, is bringing new insight to accounting students through the Schilit Scholars in Accounting program.
Schilit has a remarkable track record as a forensic accountant. While still a professor at American University he founded a private company, the Center for Financial Research and Analysis (CFRA), through which he advised more than 500 investment firms. Schilit sold that company in 2003 to a private equity firm and in 2011 started Schilit Forensics, a consulting company that solves specific problems for institutional investors, private equity firms and public companies. Today Schilit and his fast-growing staff are embedded as an extension of the client’s research team, digging deeply into financial filings and untangling the most complex accounting structures to analyze the risks of investment opportunities.
Most forensic accountants are called in after a fraud has been revealed. But Schilit is able to spot the subtle signs that a company is playing with accounting rules before its investors can be harmed by it. A company’s accounting practices can have a huge effect on the financial picture it is presenting to its investors. Schilit has seen companies change the way they record revenue to make sales growth look much better than it really was, or depreciate their assets over a much longer period of time than similar companies.
Traditional accounting curriculum doesn’t teach this type of analysis, says Schilit. When an auditor reviews a company’s financial statements, he or she is required to ensure that the statements comply with Generally Accepted Accounting Practices (GAAP) and present a fair picture of the company’s financial statements. But auditors aren’t trained in the analytical techniques that would allow them to determine whether the financial statements do indeed fairly present the company’s financial state.
“What I’m trying to do is something fairly revolutionary,” says Schilit. “I want the accounting curriculum to add the skill set that is necessary to really understand the story the company is telling. There are a lot of accounting tricks that are in compliance with the rules, but nevertheless present a misleading picture.”
Schilit Scholars will have that skill set. Two senior accounting majors will be chosen as Schilit Scholars through a competitive application process. They will receive a $5,000 academic award and participate in a one-credit independent learning course that includes hands-on learning with Schilit and his company, Schilit Forensics. A capstone project will help students turn the skills they learn during the course into a meaningful differentiator to take into the work force.
Schilit believes the program will do more than give students new skills – it will help open new doors. “Experience with these analytical techniques and ways of thinking will open interesting job opportunities for students, like investment analysts on Wall Street,” says Schilit.
Schilit Scholars Information Session: Smith School juniors/accounting majors are invited to join Howard Schilit and Professor Basu at an information session on Tuesday, Oct. 14, 2014, at 6:15 p.m. A light dinner will be provided.