AIS-Reviewer - AIS PDF

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True or False Business bankruptcy cases always involve fraudulent behavior – False According to ACFE study, most frauds are committed by employees in management positions – False Of the Fraud Triangle situational pressure is the factor that actually facilitates the act – False Ethical issues and legal issues are essentially the same – False In fraud commission, collusion among employees will be difficult to prevent but easy to detect – False The internal control system is the responsibility of management – True Skimming is stealing cash after it is recorded on the organization’s books and records – False Defalcation is another word for financial fraud – True A check digit is a method of detecting data coding errors – True The Sarbanes-Oxley Act requires only that a firm keep good records – False Opportunity involves direct access to assets and/or access to information that controls assets – True The objective of SAS 99 is to seamlessly blend the auditor’s consideration of fraud into all phases of the audit process – True

Multiple Choice All of the following are factors in the fraud triangle except – Materiality of the assets For an action to be called fraudulent, all of the following conditions are required except – Poor judgement Forces which may permit fraud to occur do not include – Centralized decision-making environment The most cost-effective type of internal control is – Preventive Control A physical inventory count is an example of a – Detective Giving or receiving something of value because of an official act that has been taken is – Illegal gratuity Which of the following is not an internal control procedure – No answer yet Which of the following is an example of an input control test – range check Forces which may permit fraud to occur do not include – No answer yet Which of the following is an example of an input error correction technique – All are example (rejection of batch, -, -)

The employee entered “40” in the “hours worked per day” field. Which check would detect this unintentional error? ___ check The board of directors consists entirely of personal friends of the CEO. This indicates a weakness in – the control environment Business ethics involves – both a and b (but di ko Mabasa bec malabo) An example of a hash total is – No answer yet One characteristic of employee fraud is that the fraud – No answer yet Systems that use a sequential master files employ a backup technique called – No answer yet A well-designed purchase order is an example of a – preventive control An accounting system that maintains an adequate audit trail is implementing which internal control procedure – accounting record Which of the following is a preventive control – No answer yet Which control procedure can prevent or detect if a manager forgot to record in the accounting records the daily bank dep. – independent verification Employee fraud involved three steps. Of the following, which is not involved? – No answer yet

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FLASHCARDS

Ethics - pertains to the principles of conduct that individuals use in making choices ad guiding their behavior in situations that involved the concepts of right and wrong. Business Ethics - How do Mangers decide what is right in conducting their business? Once managers have recognized what is right how do they achieve it? Proportionality - The benefit from a decision must outweigh the risk Justice - The benefits of the decision should be distributed fairly to those who share the risk Minimize risk - Even if judged acceptable by the principles, the decision should be implemented so as to minimize all of the risks and avoid any unnecessary risk Computer ethics - the analysis of the nature and social impact of computer technology and the corresponding formulation and justification of policies for the ethical use of such technology 3 Levels of computer ethics - pop, para, and theoretical computer security - is an attempt to avoid such undesirable events as a loss of confidentiality or data integrity Section 406 SOX

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requires public companies to disclose to the SEC whether they have adopted a code of ethics that applies to the organization's chief excutive officer, CFO, controller, or persons performing similar functions. SAS 99 - requires the auditor to perform new steps such as a brainstorming during audit planning to assess the potential risk of material misstatement of the financial statements from fraud schemes. Fraud - denotes a false representation of a material fact made by one party to another party with the intent to deceive and induce the otehr party to justifiably rely on the fact to his or her detriment. 5 conditions of fraudulent act - false representation, material fact, intent, justifiable reliance, injury or loss fraud triangle - situational pressure, opportunity, ethics corruption - involves an executive, manager, employee of the organization in collusion with an outsider bribery - involves giving, offering, soliciting, or receiving things of value to influence an official in the performance of his or her lawful duties, before the fact illegal gratuity - involves giving, receiving, offering, or soliciting something of value because of an official act that has been taken, after the fact conflicts of interest - occurs when an employee acts on behalf of a third party during the discharge of his or her duties or has self interest in the activity being performed economic extortion - is the use or threat of forcing including economic sanctions by an individual or organization to obtain something of value skimming - stealing cash from an organization before it is recorded on the organization's books and records cash larceny - schemes in which cash receipts are stolen from an organization after they have been recorded in the organizations book and records billing schemes - also known as vendor fraud, are perpetrated by employees who causes their employer to issue a payment to a false supplier or vendor by submitting invoices for fictitious goods or services, inflated invoices, or invoices for personal purchases shell company - fraud first requires that the perpetrator establish a false supplier on the books of the victim company pass through fraud - fraud with the exception that a transaction actually takes place pay and return

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typically involves a clerk with check writing authority who pays a vendor twice for the same product payroll fraud - distribution of fraudulent paychecks to existent and or nonexistent employees expense reimbursement fraud - false expense reports, claiming meals, lodging, and travel that never occurred preventive controls - passive techniques designed to reduce the frequency of occurrence of undesirable events detective controls - identify and expose undesirable events that elude preventive controls corrective controls - actions taken to reverse the effects of errors detected in the previous step SOX Section 302 - requires that corporate management certify their organization's internal controls on a quarterly and annual basis SOX Section 404 - requires the management of public companies to assess the effectiveness of their organization's internal controls SAS 78/COSO - control environment, risk assessment, information and communication, monitoring, and control activities control environment - sets the tone for the organization and influences the control awareness of its management and employees risk assessment - identify, analyze, and manage risks relevant to financial reporting information and communication - the accounting information system consists of the records and methods used to initiate, identify, analyze, classify, and record the organization's transactions and to account for the related assets and liabilities monitoring - the process by which the quality of internal control design and operation can be assessed control activities - the policies and procedures used to ensure that appropriate actions are taken to deal with the organization's identified risk...