Topic 3.1 Fraud And AIS

Question 1

What are the threats to AIS?

Answer 1

Natural and political disaster
Software errors and equipment malfunctions
Unintentional acts
Intentional acts

Question 2

Operating system crashes are examples of

Answer 2

Software errors and equipment malfunctions

Question 3

What is fraud?

Answer 3

Any means of a person uses to gain an unfair advantage over another person e.g

• a false statement, representation, or disclosure
• a material fact, which induces a victim to act
• an intent to deceive
• victim relied on the misrepresentation
• injury or loss was suffered by the victim

Fraud is a white collar crime

Question 4

What are the two categories of fraud

Answer 4

Misappropriation of assets

Fraudulent financial reporting

Question 5

What is misappropriation of assets

Answer 5

Theft to a company’s assets which can include physical assets e.g cash and inventory and digital assets e.g customer data

Question 6

What is fraudulent financial reporting

Answer 6

Cooking the books e.g booking fictitious revenue, overstating assets

Question 7

What are some reasons for fraudulent financial statements

Answer 7

1) deceive investors or creditors
2) increase a company’s stock price
3) meet cash flow needs
4) hide company losses or other problems

Question 8

What are some of the auditors responsibilities

Answer 8

• Understand fraud
• Discus the risks of material fraudulent misstatements
• Obtain information
• Identify, assess, and respond to risks
• Evaluate the results of their audit tests
• Document and communicate findings
• Incorporate a technology focus

Question 9

Conditions for fraud (fraud triangle)

Answer 9

1) pressure
- financial
- lifestyle
- emotional
2) opportunities
- commit
- conceal
- convert to personal gain
3) rationalisations
- justify behaviour
- attitude that rules don’t apply to them
- lack personal integrity

Question 10

What is computer fraud

Answer 10

An illegal act in which a knowledge of computer technology is necessary for:

Perpetration
Investigation
Persecution

Question 11

What are the computer fraud classifications

Answer 11

Input fraud
- alteration or falsifying input
Processor fraud
- unauthorised system use
Computer instructions fraud
- modifying software, illegal copying of software, using software in an unauthorised manner
Data fraud
- illegally using, copying, browsing, searching, or harming company data
Output fraud
- stealing, copying, or misusing computer printouts or displayed information

Question 12

Reasons for the rise of computer fraud

Answer 12

1) definition is not agreed on
2) many go undetected
3) high percentage is not reported
4) lack of network security
5) step by step guides are easily available
6) law enforcement is over burdened
7) difficulties calculating loss

Question 13

Ways to prevent and detect fraud

Answer 13

1) make fraud less likely to occur
2) make it difficult to commit
3) improve detection
4) reduce fraud losses

Question 14

What type of threat poses the greatest risk on information systems?

Answer 14

Unintentional acts

Question 15

Intentional or reckless conduct that results in materially misleading financial statements is called

Answer 15

Fraudulent financial reporting

Question 16

SAS No . 99 requires that auditors

Answer 16

Plan audits based on an analysis of fraud risk

Question 17

Which fraud scheme involves stealing customer receipts and applying subsequent customer cash payments to cover the theft

Answer 17

Lapping