Accounting Essay 2 pages must answer all questions
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romney_ais14_stppt_05.pptxAccounting Information Systems
Fourteenth Edition
Chapter 5
Computer Fraud
Copyright © 2018 Pearson Education, Inc. All Rights Reserved
Copyright © 2018 Pearson Education, Inc.
Chapter 5: Computer Fraud
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Learning Objectives
Explain the threats faced by modern information systems.
Define fraud and describe both the different types of fraud and the auditor’s responsibility to detect fraud.
Discuss who perpetrates fraud and why it occurs, including the pressures, opportunities, and rationalizations that are present in most frauds.
Define computer fraud and discuss the different computer fraud classifications.
Explain how to prevent and detect computer fraud and abuse.
Copyright © 2018 Pearson Education, Inc.
Chapter 5: Computer Fraud
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Threats to AIS
Natural and Political disasters
Software errors and equipment malfunctions
Unintentional acts
Intentional acts
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Chapter 5: Computer Fraud
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Fraud
Any means a person uses to gain an unfair advantage over another person; includes:
A false statement, representation, or disclosure
A material fact, which induces a victim to act
An intent to deceive
Victim relied on the misrepresentation
Injury or loss was suffered by the victim
Fraud is white-collar crime
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Chapter 5: Computer Fraud
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Two Categories of Fraud
Misappropriation of assets
Theft of company assets which can include physical assets (e.g., cash, inventory) and digital assets (e.g., intellectual property such as protected trade secrets, customer data)
Fraudulent financial reporting
“cooking the books” (e.g., booking fictitious revenue, overstating assets, etc.)
Copyright © 2018 Pearson Education, Inc.
Chapter 5: Computer Fraud
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Auditor’s Responsibility
SAS No. 99 (AU-C Section 240) requires auditor’s to:
Understand fraud
Discuss the risks of material fraudulent misstatements
Obtain information
Identify, assess, and respond to risks
Evaluate the results of their audit tests
Document and Communicate findings
Incorporate a technology focus
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Chapter 5: Computer Fraud
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Conditions for Fraud
These three conditions must be present for fraud to occur:
Pressure
Employee
Financial
Lifestyle
Emotional
Financial Statement
Financial
Management
Industry conditions
Opportunity to:
Commit
Conceal
Convert to personal gain
Rationalize
Justify behavior
Attitude that rules don’t apply
Lack personal integrity
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Fraud Triangle
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Copyright © 2018 Pearson Education, Inc.
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Computer Fraud
If a computer is used to commit fraud it is called computer fraud.
Computer fraud is classified as:
Input
Processor
Computer instruction
Data
Output
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Preventing and Detecting Fraud 1. Make Fraud Less Likely to Occur
Organizational
Systems
Create a culture of integrity
Adopt structure that minimizes fraud, create governance (e.g., Board of Directors)
Assign authority for business objectives and hold them accountable for achieving those objectives, effective supervision and monitoring of employees
Communicate policies
Develop security policies to guide and design specific control procedures
Implement change management controls and project development acquisition controls
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Preventing and Detecting Fraud 2. Make It Difficulty to Commit
Organizational
Systems
Develop strong internal controls
Segregate accounting functions
Use properly designed forms
Require independent checks and reconciliations of data
Restrict access
System authentication
Implement computer controls over input, processing, storage and output of data
Use encryption
Fix software bugs and update systems regularly
Destroy hard drives when disposing of computers
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Chapter 5: Computer Fraud
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Preventing and Detecting Fraud 3. Improve Detection
Organizational
Systems
Assess fraud risk
External and internal audits
Fraud hotline
Audit trail of transactions through the system
Install fraud detection software
Monitor system activities (user and error logs, intrusion detection)
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Chapter 5: Computer Fraud
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Preventing and Detecting Fraud 4. Reduce Fraud Losses
Organizational
Systems
Insurance
Business continuity and disaster recovery plan
Store backup copies of program and data files in secure, off-site location
Monitor system activity
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Chapter 5: Computer Fraud
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Key Terms
Sabotage
Cookie
Fraud
White-collar criminals
Corruption
Investment fraud
Misappropriation of assets
Fraudulent financial reporting
Pressure
Opportunity
Rationalization
Lapping
Check kiting
Computer fraud
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