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