Proposed Fraud Risk Index Could Help Investors Track Corporate Fraud

The article suggests creating a tool to measure how likely a company may be to experience fraud.

This tool would be called a Fraud Risk Index.

It would help investors watch for warning signs.

The idea is based on six possible parts of fraud risk.

Pressure means someone feels motivated to commit fraud.

Opportunity means weak controls make fraud easier.

Rationalization and arrogance describe ways people may justify fraud or believe they will not be caught.

Capability and collusion refer to having the skills or position to commit fraud and working with others.

These factors could be measured and combined into one overall score.