IS 414 CH. 5

Question 1

What are the threats to Accounting Information Systems?

Answer 1

Natural & political disasters, Software errors and equipment malfunctions, unintentional acts, and intentional acts (computer crimes)

Question 2

Natural & political disasters

Answer 2

fire or excessive heat
floods, earthquakes, landslides, hurricanes, tornadoes,etc
war and attacks by terrorists

Question 3

Software errors and equipment malfunctions

Answer 3

hardware or software failure
operating system crashes
power outages & fluctuations
undetected data transmission error

Question 4

Unintentional acts

Answer 4

accidents caused by human carelessness, failure to follow procedures
innocent errors and omissions
logic errors
lost, misplaced, or destroyed data
systems that do not meet company needs or handle tasks

Question 5

Intentional acts (computer crimes)

Answer 5

sabotage
false use, unauthorized disclosure of data
financial statement fraud
corruption
computer fraud (attack, social engineering, malware, etc)

Question 6

sabotage

Answer 6

an intentional act where the intent is to destroy a system or some of its components

Question 7

fraud

Answer 7

any and all means a person uses to gain an unfair advantage over another person

Question 8

For an act to be fraudulent

Answer 8

1. False statement, representation, or disclosure
2. A material fact, which is something that induces a person to act
3. An intent to deceive
4. A justifiable reliance; that is, the person relies on the misrepresentation to take an action
5. An injury or loss suffered by the victim

Question 9

white-collar crimes

Answer 9

businesspeople who commit fraud, they usually resort to trickery or cunning and their crimes usually involve a violation of trust or confidence

Question 10

corruption

Answer 10

dishonest conduct by those in power which often involves actions that are illegitimate, immoral, or incompatible with ethical standards. Ex: bribery, bid rigging

Question 11

investment fraud

Answer 11

misrepresentation or leaving out facts in order to promote an investment that promises fantastic profits with little or no risk. Ex: ponsi scheme and securities fraud

Question 12

misappropriation of assets

Answer 12

theft of company assets by employees

Question 13

describe both the different types of fraud

Answer 13

misappropriation of assets (sometimes called employee fraud) and fraudulent financial reporting (sometimes called management fraud)

Question 14

misappropriation of assets (steps)

Answer 14

is the absence of internal controls and/or the failure to enforce existing internal controls

• gains the trust of entity being defrauded
• uses trickery, cunning, or false misleading info
• conceals fraud by falsifying records or other info
• rarely terminates the fraud voluntarily
• sees how easy it is to get money, or has greed (self-perpetuating; if they stop, they’ll get caught)
• spend the money
• greedy, takes more money more often
• grows careless or overconfident

Question 15

fraudulent financial reporting

Answer 15

intentional or reckless conduct, whether by act or omission, that results in materially misleading financial statements

Question 16

Who perpetrates fraud?

Answer 16

white collar fraud - people like you & me

computer fraud - younger people with more computer experience

Question 17

Fraud Triangle

Answer 17

pressure, opportunity, and rationalization

Question 18

pressure

Answer 18

person’s incentive or motivation for committing fraud

Question 19

opportunity

Answer 19

the condition or situation that allows a person or organization to commit and conceal a dishonest act and convert it to a person gain

• can hide in an expense account
• use lapping
• check kiting

Question 20

lapping

Answer 20

concealing the theft of cash by means of series of delays in posting collections to account receivables

Question 21

check kiting

Answer 21

creating cash using the lag between the time a check is deposited and the time it clears the bank

Question 22

rationalizations

Answer 22

the excuse that fraud perpetrators use to justify their illegal behavior

Question 23

computer fraud

Answer 23

any type of fraud that requires computer technology to perpetrate

Question 24

input fraud

Answer 24

alter or falsify computer input

Question 25

processor fraud

Answer 25

unauthorized system use, including the theft of computer time and services

Question 26

computer instruction fraud

Answer 26

includes tampering with company software, copying software illegally, using software in an unauthorized manner, and developing software to carry out an unauthorized activity

Question 27

data fraud

Answer 27

illegally using, copying, browsing, searching, or harming company data

Question 28

output fraud

Answer 28

unless properly safeguarded, displayed or printed output can be stolen, copied, or misused

Question 29

Preventing and detecting fraud

Answer 29

the prevent fraud organizations must create a climate that makes fraud less likely, increases the difficulty of committing it, improves detection methods, and reduces the amount lost if a fraud occurs