Financial statement fraud is big business. The pressure to keep up the appearance that a company is doing well is immense. This type of fraud is unique. Usually, a large number of people are involved, with the benefit of the fraud realized by the participants in gains on the stock exchange, bonuses for meeting targets, promotions etc. Marianne Jennings, a Professor of Legal and Ethical Studies in Business at Arizona State University, has developed a model to identify fraud, which she outlined in her 2006 book, “The Seven Signs of Ethical Collapse.”

Here are the seven traits that help to identify fraudulent companies:

  1. The pressure to maintain numbers,
  2. Fear and silence,
  3. Young ‘uns and a bigger-than-life CEO,
  4. Weak board of directors,
  5. Conflicts of interest overlooked or unaddressed,
  6. Innovation like no other company,
  7. Goodness in some areas atones for evil in others.

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