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Most of the fraud symptoms in this case relate to management, the board of directors, and relationships with others. Management and the board of directors:

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Most of the fraud symptoms in this case relate to management, the board of directors, and relationships with others. Management and the board of directors: The senior officers were friends. They had a lot of power in the new company, which allowed them to collude if needed. Their positions in the company allowed them to influence decisions and override internal controls as they wished. They owned a large percentage of the common stock, so they had a personal motivation for the stock price to be as high as possible. They comprised a large percentage of the board of directors, so they were insiders. Retationships with others: The fact that the president of the local bank was appointed to the board of directors not only represented a gray member in the board (because he had loaned the company money), but it could also represent a concem about how valid the transactions are between the company and the bank. Is the bank giving the company extremely lax credit terms of an unreasonably low interest rate? Are the transactions with the bank arm's-Jength? One might also be concemed about the company's relationship with city officials, who feel a strong. motivation to keep this company in town because it boosts the city's ecenomy, provides jobs; etc

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