Financial Statement Fraud

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.

http://www.acfi.com; http://www.acfe.com

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