Fraud - Summary Accounting Information Systems PDF

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summary about chapter fraud...

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Fraud AIS is becoming more complex to meet the increasing need for information, it is also facing difficulty for the safety of the complex information systems created for different types of companies. There are mainly four types of AIS threats companies usually face. They are: Natural and Political Disaster-Earthquakes, Snowstorms Software errors and equipment malfunctions-Hardware or software failure, Power Outage Unintentional Acts-Misplaced data, Human carelessness accidents Intentional Acts (Computer crimes)-Sabotage, Corruption

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AIS face a major issue which is the topic for this summary known as ‘’Fraud’ ’It is an intended act or false acclamation to obtain unfair and meaningless gain. In AIS fraud is a common scenario companies are facing every day. An act to be proven fraudulent in legal terms, it has to have one of the following types: A false statement, representation or disclosure A material Fact An intention to deceive A justifiable reliance Injury or loss

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Every week there has to be a news about fraudulent activity taking place either a milliondollar fraud faced by a multinational or a small amount of money related fraud faced by a local company. An association named Association of Certified Fraud Examiner (ACFE) runs fraud studies and delivers its findings in a ‘’Report to the Nation on Occupational Fraud and Abuse’’ which at least enables the companies to be aware of the scenarios of fraudulent activities faced by other similar companies. Perpetrators of fraud are known as White collar criminals who are usually cunning and cleaver business people who breach the trust and confidence of people involved in the business. Two common types of frauds which is happening everywhere in every business are Corruption: which is mis usage of power to do immoral activities and breaking ethical standards. Investment Fraud: which is providing misleading or made up facts which encourages to invest in an investment with a promise of profitable future with no or little risk involved.

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Now let’s look at two types of frauds which are important to business: 1)Misappropriation of assets which is employees stealing assets of the company 2)Fraudulent Financial Reporting-Intentional or thoughtless step taken for misleading the financial statements of the company. Ways in which auditors can detect fraud are:    

Understand Fraud Discuss the risks of material fraudulent misstatements Obtain Information Identify, assess ad respond to risks

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Evaluate the results of their audit tests Document and communicate findings Incorporate a technology focus

The reason who perpetrates fraud and why is a mysterious question everyone looks answers for. The perpetrates of fraud are just like normal human being only difference being he or she has a negative motive or is seeking revenge for their own satisfaction or fulfilment by harming someone or something. There is a fraud triangle which is used by first time fraud perpetrators:   

Pressure: Intention to commit fraud Opportunity: To perform a dishonest act for personal satisfaction Rationalizations: Excuses made by fraud perpetrators to justify their illegal actions

Innovations in modern technology has made life easier with computers, tablets and other gadgets. But even these gadgets are not safe from frauds. As all companies are dependent on computers for their everyday task, fraud perpetrators take advantage by messing with the computers. Computer fraud is any type of fraud which needs computer technology to perpetrate examples are unauthorized theft, copying, obtaining information illegally using computers. There are ways computer fraud can be classified:     

Input Fraud: Altering computer input Processor Fraud: Using system without authorization Computer Instructions Fraud: Tampering company software, copying illegal software, etc Data Fraud: Illegally copying, searching or harming computer data Output Fraud: Theft or misuse of printed output

There are ways companies can prevent fraud or detect fraud. They can make the working environment more secure and strict, making it more complicated to commit fraud and improve detection methods....