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BUS 319: Accounting Information Systems > Chapter 3: Ethics, Fraud, And Internal Control > Flashcards

Chapter 3: Ethics, Fraud, And Internal Control Flashcards

1
Q

Ethics

A

Pertains to the principles of conduct that individuals use in making choices and guiding their behavior in situations that involve the concept of right and wrong

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2
Q

Business Ethics

A

Involves finding the answers to 2 questions. How do managers decide what is right in conducting business? And how do they achieve what is right?

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3
Q

Computer Ethics

A

Is 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

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4
Q

Privacy

A

People desire to be in full control of what and how much information about themselves is available to others

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5
Q

Security

A

Is an attempt to avoid such undesirable events as a loss of confidentiality or data integrity

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6
Q

Fraud

A

Denotes a false representation of a material fact made by one party to another party with the intent to deceive the other party to justifiably rely on the fact

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7
Q

False Representation

A

There must be a false statement or a non disclosure

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8
Q

Material Fact

A

A fact must be a substantial factor in inducing someone to act

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9
Q

Intent

A

There must be the intent to deceive or the knowledge that one’s statement is false

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10
Q

Justifiable Reliance

A

The misrepresentation must have been a substantial fact on which the injured party relied

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11
Q

Injury or Loss

A

The deception must have caused injury or loss to the victim of the fraud

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12
Q

Employee Fraud

A

Is generally designed to directly convert cash or other assets to the employee’s personal benefit

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13
Q

Management Fraud

A

Usually does not involve the direct theft of assets. Is usually done by top management where internal controls can’t detect

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14
Q

Fraud Triangle

A

Consists of situational pressure, opportunity, and ethics

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15
Q

Fraudulent Statements

A

Are associated with management fraud. The financial statement misrepresentation must bring direct or indirect financial benefit to the perpetrator

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16
Q

Corruption

A

Involves an executive, manager or employee of the organization in collusion with an outsider. 10% of occupational fraud cases

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17
Q

Bribery

A

Involves giving, offering, or soliciting things of value to influence an official in the performance of their lawful duties

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18
Q

Illegal Gratuity

A

Involves giving or receiving something of value because of an official act that has been taken

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19
Q

Conflict of Interest

A

Occurs when an employee acts on behalf of a third party during the discharge of their duties or has self interest in the activity

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20
Q

Economic Extortion

A

Is the use of force by an individual or organization to obtain something of value

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21
Q

Skimming

A

Involves stealing cash from an organization before it is recorded on the organization’s books and records

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22
Q

Cash Larceny

A

Involves schemes in which cash receipts are stolen from an organization after they have been recorded in the organization’s books and records

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23
Q

Lapping

A

In which the cash receipts clerk first steals and cashes a check from customer A and makes up the difference from customer B

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24
Q

Vendor Fraud

A

Are perpetrated by employees who cause their employer to issue a payment to a false supplier by submitting invoices for goods and services

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25
Q

Shell Company

A

First requires that the perpetrator establish a false supplier in the books of the victim company. Them by issuing false invoices creates payments to this false supplier

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26
Q

Pass Through Fraud

A

Is similar to a shell company fraud with the exception that a transaction has taken place. Inventory is purchased from a legitimate supplier then the place is inflated by a fake supplier before being sold to the victim company

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27
Q

Pay and Return

A

Involves a clerk with check writing authority who intentionally pays a vendor twice for the same invoice. The supplier reimburses one of the checks and the employee takes the cash

28
Q

Check Tampering

A

Involves forging or changing in some material way a check that the organization has written to a legitimate payee.

29
Q

Payroll Fraud

A

Is the distribution of fraudulent paychecks

30
Q

Expense Reimbursement Fraud

A

Involves false or inflated expense reimbursements

31
Q

Non Cash Misappropriations

A

Involve the theft of non cash assets like inventory or information

32
Q

Internal Control System

A

Consists of policies, practices, and procedures to achieve objectives

33
Q

Management Responsibility

A

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

34
Q

Reasonable Assurance

A

Cost of achieving objectives should not outweigh the benefits

35
Q

Methods of Processing

A

Control techniques vary with different types of technology

36
Q

Limitations of Internal Control

A

Possibility of error, circumvention, management override, and changing conditions

37
Q

Exposure

A

The absence or weakness of a control

38
Q

Preventive Controls

A

Are passive techniques designed to reduce undesirable events by forcing compliance with prescribed or desired actions

39
Q

Detective Controls

A

Are designed to identify undesirable events that elude preventive controls

40
Q

Corrective Controls

A

Are actions taken to reserve the effects of errors detected

41
Q

Sox Section 302

A

Requires management to certify organization’s internal on a quarterly and annual basis

42
Q

Sox Section 404

A

Requires management to assess internal control effectiveness

43
Q

Control Environment

A

Set the tone for the organization and influences control awareness

44
Q

Risk Assessment

A

To identify, analyze, and manage financial reporting risks

45
Q

Monitoring

A

Is the process by which the quality of internal control design and operations can be assessed

46
Q

Control Activities

A

Are policies and procedures to ensure appropriate actions are taken to deal with identified risks

47
Q

Transaction Authorization

A

Is to ensure all material transactions processes are valid

48
Q

Segregation of Duties

A

Designed to minimize incompatible functions including separating transaction authorization and asset custody and record keeping

49
Q

Supervision

A

Is a compensating control in organizations too small for sufficient segregation of duties

50
Q

Accounting Records

A

Consist of source documents, journals, and ledgers which provide an audit trial

51
Q

Access Controls

A

Ensure that only authorized personnel have access to firm assets

52
Q

Independent Verification Procedures

A

Are checks to identify errors and misrepresentations

53
Q

Check Digit

A

Is a control digit that is added to the data code when originally assigned

54
Q

Missing Data Check

A

Identifies blank or incomplete input fields

55
Q

Numeric Alphabetic Check

A

Indemnified data in the wrong form

56
Q

Limit checks

A

Identify fields that exceed authorized limits

57
Q

Range Checks

A

Verify that all amours fall within an acceptable range

58
Q

Reasonableness Checks

A

Verify that amounts that have based limit and range checks are reasonable

59
Q

Validity Checks

A

Compares actual fields against acceptable values

60
Q

Processing Controls

A

Are programmed procedures to ensure an applications logic is functioning properly

61
Q

Batch Controls

A

Manage the flow of high volume transactions and reconcile system output with original input

62
Q

Audit Trail Controls

A

Ensure every transaction can be traced through each stage to processing from source to financial statements

63
Q

Grandfather Father Son Backup

A

Used with systems that use sequential master files

64
Q

Destructive Update

A

Approach leaves no backup copy and requires a special recovery program if data is destroyed or corrupted

65
Q

Output Controls

A

Are procedures to ensure output is not lost, misdirected or corrupted and that privacy is not violated

BUS 319: Accounting Information Systems (4 decks)

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