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Romney Ais13 PPT 05
Romney Ais13 PPT 05
Chapter 5
• Define fraud and describe both the different types of fraud and the process
one follows to perpetuate a fraud.
• Discuss who perpetrates fraud and why it occurs, including the pressures,
opportunities, and rationalizations that are present in most frauds.
• Unintentional acts
• Intentional acts
• 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.)
Organizational Systems
• Develop strong internal • Restrict access
controls • System authentication
• Segregate accounting • Implement computer controls
functions over input, processing, storage
• Use properly designed forms and output of data
• Require independent checks • Use encryption
and reconciliations of data • Fix software bugs and update
systems regularly
• Destroy hard drives when
disposing of computers
Copyright © 2015 Pearson Education, Inc.
5-10
Preventing and Detecting Fraud
3. Improve Detection
Organizational Systems
• Assess fraud risk • Audit trail of transactions
• External and internal audits through the system
• Fraud hotline • Install fraud detection
software
• Monitor system activities (user
and error logs, intrusion
detection)
Organizational Systems
• Insurance • Store backup copies of
• Business continuity and program and data files in
disaster recovery plan secure, off-site location
• Monitor system activity
• Sabotage • Pressure
• Cookie • Opportunity
• Fraud • rationalization
• White-collar criminals • Lapping
• Corruption • Check kiting
• Investment fraud • Computer fraud
• Misappropriation of assets
• Fraudulent financial reporting