Textbook Notes (368,566)
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ADM4346 (10)
Chapter 5

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Sheldon Weatherstone

Chapter 5: Computer Fraud Common Threats to AIS • Natural Disasters and Terrorist Threats • Software Errors and/or Equipment Malfunction • Unintentional Acts (Human Error) • Intentional Acts (Computer Crimes) What Is Fraud? • Gaining an unfair advantage over another person o A false statement, representation, or disclosure o A material fact that induces a person to act o An intent to deceive o A justifiable reliance on the fraudulent fact in which a person takes action o An injury or loss suffered by the victim • Individuals who commit fraud are referred to as white-collar criminals. Forms of Fraud • Misappropriation of assets o Theft of a companies assets. o Largest factors for theft of assets:  Absence of internal control system  Failure to enforce internal control system • Fraudulent financial reporting o “…intentional or reckless conduct, whether by act or omission, that results in materially misleading financial statements” (The Treadway Commission). Reasons for Fraudulent Financial Statements • Deceive investors or creditors • Increase a company’s stock price • Meet cash flow needs • Hide company losses or other problems Treadway Commission Actions to Reduce Fraud • Establish environment which supports the integrity of the financial reporting process. • Identification of factors that lead to fraud. • Assess the risk of fraud within the company. • Design and implement internal controls to provide assurance that fraud is being prevented. SAS #99 • Auditors responsibility to detect fraud o Understand fraud o Discuss risks of material fraudulent statements  Among members of audit team o Obtain information  Look for fraud risk factors o Identify, assess, and respond to risk o Evaluate the results of audit tests  Determine impact of fraud on financial statements o Document and communicate findings  See Chapter 3 o Incorporate a technological focus The Fraud Triangle • Pressure o Work, family. • Opportunity o No control to catch them • Rationalization
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