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2nd sem midterms > AIS MOD 3 > Flashcards

AIS MOD 3 Flashcards

1
Q

Four main areas of business ethics

A

equity
rights
honesty
exercise of corporate power

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2
Q

concerns the social impact of computer technology

A

computer ethics

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3
Q

what are the three social impact of computer technology

A

hardware
software
telecommunications

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4
Q

What are the main computer ethics issues?

A

● Privacy
● Security—accuracy and confidentiality
● Ownership of property
● Equity in access
● Environmental issues
● Artificial intelligence
● Unemployment and displacement
● Misuse of computer

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5
Q

false statement or disclosure

A

false representation

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6
Q

a fact must be substantial in inducing someone to act

A

material fact

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7
Q

this must exist in order to be called a fraud

A

intent to deceive

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8
Q

The misrepresentation must have resulted in _________ upon information, which caused someone to act

A

justifiable reliance

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9
Q

fraud: the misrepresentation must have caused?

A

injury or loss

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10
Q

Enron, WorldCom, Adelphia
Underlying Problems

A

-lack of auditor independence
-lack of director independence
-questionable executive compensation schemes
-inappropriate accounting practices

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11
Q

Committed by non-management personnel

A

employee fraud

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12
Q

employee fraud is committed by?

A

non-management personnel

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13
Q

examples of employee fraud

A

an employee taking cash or other assets for personal gain by circumventing a company’s system of internal controls

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14
Q

Perpetrated at levels of management above the one to which internal control structure relates

A

management fraud

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15
Q

Frequently involves using financial statements to create an illusion that an entity is more healthy and prosperous than it actually is

A

management fraud

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16
Q

Involves misappropriation of assets, it frequently is shrouded in a maze of complex business transactions

A

management fraud

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17
Q

three categories of fraud schemes

A

A. fraudulent statements
B. corruption
C. asset misappropriation

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18
Q

Misstating the financial statements to make the copy appear better than it is

A

fraudulent statements

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19
Q

Usually occurs as management fraud

A

fraudulent statements

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20
Q

May be tied to focus on short-term financial measures for success

A

fraudulent statements

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21
Q

May also be related to management bonus packages being tied to financial statements

A

fraudulent statements

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22
Q

examples of corruption

A

●bribery
●illegal gratuities
●conflicts of interest
●economic extortion

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23
Q

●indicative of corruption in business world
●impacted accounting by requiring accurate records and internal controls

A

Foreign Corrupt Practice Act of 1977

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24
Q

Most common type of fraud and often occurs as employee fraud

A

asset misappropriation

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25
Q

asset misappropriation examples

A

●making charges to expense accounts to cover theft of asset (especially cash)
●lapping: using customer’s check from one account to cover theft from a different account
●transaction fraud: deleting, altering, or adding false transactions to steal assets

26
Q

internal control objectives

A

1.Safeguard assets of the firm
2.Ensure accuracy and reliability of accounting records and information
3.Promote efficiency of the firm’s operations
4.Measure compliance with management’s prescribed policies and procedures

27
Q

Modifying Assumptions to the Internal Control Objectives

A

management responsibility
reasonable assurance
methods of data processing

28
Q

The establishment and maintenance of a system of internal control is the responsibility of management.

A

management responsibility

29
Q

The cost of achieving the objectives of internal control should not outweigh its benefits.

A

reasonable assurance

30
Q

The techniques of achieving the objectives will vary with different types of technology.

A

methods of data processing

31
Q

Limitations of Internal Controls

A

●Possibility of honest errors
●Circumvention via collusion
●Management override
●Changing conditions

32
Q

Exposures of Weak Internal Controls (Risk)

A
  • destruction
  • theft
  • corruption
  • disruption
33
Q

five internal control components SAS 78/COSO

A
  1. Control environment
  2. Risk assessment
  3. Information and communication
  4. Monitoring
  5. Control activities
34
Q

●Integrity and ethics of management
●Organizational structure
●Role of the board of directors and the audit committee
●Management’s policies and philosophy
●Delegation of responsibility and authority
●Performance evaluation measures
●External influences—regulatory agencies
●Policies and practices managing human resources

A

The control environment

35
Q

Identify, analyze and manage risks relevant to financial reporting

A

risk assessment

36
Q

The AIS should produce high quality information which:
●identifies and records all valid transactions
●provides timely information in appropriate detail to permit proper classification and financial reporting
●accurately measures the financial value of transactions
●accurately records transactions in the time period in which they occurred

A

information and communication

37
Q

The process for assessing the quality of internal control design and operation

A

monitoring

38
Q

test of controls by internal auditors

A

separate procedures

39
Q

Policies and procedures to ensure that the appropriate actions are taken in response to identified risks

A

control activities

40
Q

control activities two distinct categories

A

IT controls
physical controls

41
Q

relate specifically to the computer environment

A

IT controls

42
Q

primarily pertain to human activities

A

physical controls

43
Q

two types of IT controls

A

general controls
application controls

44
Q

pertain to the entitywide computer environment

A

general controls

45
Q

ensure the integrity of specific systems

A

application controls

46
Q

six types of physical controls

A

●Transaction Authorization
●Segregation of Duties
●Supervision
●Accounting Records
●Access Control
●Independent Verification

47
Q

used to ensure that employees are carrying out only authorized transactions

A

transaction authorization

48
Q

general (everyday procedures) or specific (non-routine transactions) authorizations

A

transaction authorization

49
Q

In manual systems, separation between:
●authorizing and processing a transaction
●custody and recordkeeping of the asset
●subtasks

A

segregation of duties

50
Q

In computerized systems, separation between:
●program coding
●program processing
●program maintenance

A

segregation of duties

51
Q

a compensation for lack of segregation; some may be built into computer systems

A

supervision

52
Q

provide an audit trail

A

accounting records

53
Q

help to safeguard assets by restricting physical access to them

A

access controls

54
Q

reviewing batch totals or reconciling subsidiary accounts with control accounts

A

independent verification

55
Q

automated re-ordering of inventory without human intervention

A

EDI/JIT

56
Q

A computer program may perform many tasks that are deemed incompatible.

A

segregation of duties

57
Q

Thus the crucial need to separate program development, program operations, and program maintenance.

A

segregation of duties

58
Q

The ability to assess competent employees becomes more challenging due to the greater technical knowledge required.

A

supervision

59
Q

ledger accounts and sometimes source documents are kept magnetically

A

accounting records

60
Q

no audit trail is readily apparent

A

accounting records

61
Q

Data consolidation exposes the organization to computer fraud and excessive losses from disaster.

A

access control

62
Q

●When tasks are performed by the computer rather than manually, the need for an independent check is not necessary.
●However, the programs themselves are checked.

A

independent verification

2nd sem midterms (4 decks)

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