Financial Statement Fraud

Financial Statement Fraud

Financial Statement Fraud affects a number of people. The reasons for the fraud are varied, but in 51% of cases result in the company going into liquidation.

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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. Normally 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. </li></ol>