...Seetharaman and Tan Wei Khong Faculty of Management, Multimedia University, Cyber Jaya, Malaysia Abstract Purpose – To highlight the pressures that the auditors would face in the era of globalisation and the challenges they should be willing to accept in order to maintain trust and integrity. Design/methodology/approach – A wide range of articles and journals published in international journals as well as local journals has been reviewed. The areas covered include audit fraud, true and fair view interpretation, auditor independence and role of internal auditors. Further, ideas have also been obtained from critical write-ups in the business magazines on the fall of multinationals. Findings – A wide range of interpretation has been given by various groups of people on their understanding of the phrase “true and fair”. This has created great confusion as to the interpretation of the audit reports. This has been proven by the fall of many multinationals and the audit pioneers, Andersens. This is one of the causes of audit fraud and it is also seen that as the auditors face an enormous challenge as they enter the twenty-first century, they should be willing to change their attitudes towards their clients. Professionalism should be in the forefront, and an overhaul in the concept of “true and fair” could probably be the solution to harmonisation of the economy. Research limitations/implications – This paper lacks statistical data on the views of the authors. It is based purely on secondary...
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...Fraud, Governance and Internal Controls What is a fraud What is a fraud? The Financial Accounting book gives us a definition “A fraud is a dishonest act by an employee that results in personal benefit to the employee at a cost to the employer.” The reasons why people commit fraud are various. Fraud triangle can give us a good explanation. Financial pressures, from family or lifestyle, will lead an employee to fraud. Opportunity, which will allure an employee to do fraudulent activities, and Rationalization, which make one feel less guilty to do so, has same effect. How to prevent and detect fraud As fraudulent activities keep happening in every company every year, internal control is indispensable. It has five primary components: A control environment, Risk assessment, Control activities, Information and communication, and Monitoring. There are a lot of methods that we can use to prevent, deter and detect fraud? I think Physical control is probably the straightest one. Just lock inventories in a warehouse, set password in the computer, or put important bills in a safe box can prevent employees from stealing things. Segregation of duties, such as arrange different people to make order, authorize payment, and receive goods, is effective, because it eliminate the opportunities to take advantage in the chain. Documentation procedures are important, because it is a method to keep record of everything. It is the evidence of something occurred. There are also lots of other...
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...Discussion "Fraud " Please respond to the following: * From the e-Activity, evaluate the cause(s) of the fraud. Recommend a strategy that could have prevented the fraud. Support your recommendation with examples. ACC 578 Week 2 Discussion 1 "Data Analysis and Fraud Investigation" Please respond to the following: * Imagine that you have been hired as a fraud examiner to review the risk of fraud at a major retailer. Analyze the data analysis tools available to you and propose a plan for which tools you will use. Provide a rationale for your plan. ACC 578 Week 2 Discussion 2 "Audit Objectives and Computer Analysis" Please respond to the following: * You have been tasked by your audit manager to develop an audit plan of a major bank. Propose the key elements of your audit plan and the end result you expect from implementing the audit. Justify the key elements you chose for the plan. * From the e-Activity, analyze the systems the company used and propose a computer analysis plan that would have detected the fraud. Support your analysis with examples. ACC 578 Week 2 Assignment 1 Fraud Prevention and Detection Policy Due Week 2 and worth 160 points You are a senior accountant at a new start-up information technology company known as Dingwow Inc. You have just recently been hired and the company has charged you with recommending a fraud policy. Use the Internet, Strayer databases, or your text, to research the elements of an effective fraud policy. Write...
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...htm Anatomy of computer accounting frauds A. Seetharaman, M. Senthilvelmurugan and Rajan Periyanayagam Faculty of Management, Multimedia University, Malaysia Keywords Fraud, Corruption, Financial reporting, Whistleblowing, Internal control, Corporate governance Abstract This paper introduces fraud as asset misappropriations (85 per cent of cases), corruption and fraudulent statements. Symptoms include accounting anomalies, lack of internal control environment, lifestyle and behaviour. The most effective tools for fraud detection are internal audit review, specific investigation by management, and whistle-blowing. The paper details the fraud investigation process and the role of auditors as fraud examiners. The correlation of fraud perpetrators’ personality with the size of losses is examined. Personality is analysed into age, gender, position, educational background and collusion. A strong system of internal control is most effective in fraud prevention. Fraud prevention procedures, targeted goals and improvements to system weaknesses feature in the paper. Fraud impacts on accounting transactions in accounts receivable, receipts and disbursements, accounts payable, inventories and fixed assets, and financial reporting. The monetary impact resulting from fraud is analysed by the type of victim and the amount of loss. Internal control and good employment practices prevent fraud and mitigate loss. Computer accounting frauds 1055 Introduction Accounting fraud involves an intentional...
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...Today to Detect Fraud; include how do these responsibilities fit into the professional practices of: external auditors, Certified Public Accountants in public practice and Internal Auditors and what has changed in these areas in recent years? For standards or articles use the following items as they relate to your paper to help organize your paper. Statements on Auditing Standards (SAS), especially all those statements relating to fraud, Financial Accounting Standards Board (FASB), International Financial Reporting Standards (IFRS), Sarbanes-Oxley Act , etc. (SOX, Sarbox); International Standards for the Professional Practice of Internal Auditing (Standards), European Confederation of Institutes of Internal Auditing (ECIIA), Committee of Sponsoring Organizations of the Treadway Commission (COSO) , Public Company Accounting Oversight Board (PCAOB)and its standards, and professional articles or books as primary sources. • • • • PLEASE HELP ME OUT EDITING THIS PAPER, SENTENCE STRUCTURE, ADD SENTENCES IF NEEDED I’M LOOKING FORWARD TO AN A PAPER AFTER THIS PROOF READING Thank you in advance please help • Auditors’ Responsibility to detect Fraud today Public companies are required by the SEC to prepare and issue financial statements that made a fair presentation of the companies’ performance. The SEC also stipulates that the companies whose shares are publicly traded must complete an audit done by an independent auditor. The audit process involves...
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...CHAPTER 5 COMPUTER FRAUD SUGGESTED ANSWERS TO DISCUSSION QUESTIONS 5.1 Do you agree that the most effective way to obtain adequate system security is to rely on the integrity of company employees? Why or why not? Does this seem ironic? What should a company do to ensure the integrity of its employees? The statement is ironic because employees represent both the greatest control strength and the greatest control weakness. Honest, skilled employees are the most effective fraud deterrent. However, when fraud occurs, it often involves an employee in a position of trust. As many as 90% of computer frauds are insider jobs by employees. Employers can do the following to maintain the integrity of their employees. (NOTE: Answers are introduced in this chapter and covered in more depth in Chapter 7) Human Resource Policies. Implement human resource policies for hiring, compensating, evaluating, counseling, promoting, and discharging employees that send messages about the required level of ethical behavior and integrity Hiring and Firing Practices: Effective hiring and firing practices include: o Screen potential employees using a thorough background checks and written tests that evaluate integrity. o o Remove fired employees from all sensitive jobs and deny them access to the computer system to avoid sabotage. Managing Disgruntled Employees: Some employees who commit a fraud are disgruntled and they are seeking revenge or "justice" for some wrong...
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...has auditing. The concept of auditing is as old as civilization. The need for a knowledgeable, external, third person to verify transactions or accounts and detect fraud has been present since the advent of trade and accounting. Thus the goal of auditing, in this sense, has not changed since. Teck-Heang Lee observed that “auditing serves as a mechanism to monitor conduct and performance, and to secure and enforce accountability (Lee 2008). All in all, an audit function plays a crucial role in maintain welfare and stability in society.” However, what has changed is how the roles and responsibilities of auditors have changed to reflect the needs of the business environment of the time. As such, auditors and the auditing profession have always played a very important role in business and, more recently, in society in general. As business in today’s world becomes more dynamic, accounting (and therefore by extension auditing) must also evolve to become more dynamic. The evolution of auditing is a complicated history that has always been changing through historical events. This can be seen in the shift in the role of external auditors from a cyclical audit approach to now more of a top-down risk-based continuous audit. The factors that have played a major role in this shift of role and responsibilities are the cycle of fraud, regulation, and compliance; and also the rise and importance of technology in the Information Age we currently live in. The combination of these two factors...
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...Corporate fraud can be very difficult to prevent and to catch. Corporate fraud schemes go beyond the scope of an employee’s stated position, and are marked by their complexity and economic impact on other employees and outside parties. By creating a system of checks and balances and physical security, a company may limit the amount of fraud that may be able to take place. This type of crime is considered a white collar crime. Three new ways that I believe will get rid of corporate fraud are: a. Evaluate programs and control When the auditor identifies risks of material misstatements due to fraud, the auditor must consider management’s programs and controls to address those risks. Auditors may want to include broader programs or certain controls designed to prevent, or detect fraud. The auditor would estimate whether these programs have been designed and placed in operation. b. Auditor’s response The auditors can develop a suitable response for every fraud risk recognized and includes more extensive guidance on how to do so. The auditors responses are usually influenced by the nature of the risks recognized, may have an overall effect on how the audit is conducted or might involve changing the nature. The response will usually involve performing certain procedures to address the risk of management override of controls. c. Expanded scope for assessing fraud risks The auditors should obtain a broader range of information to act as the foundation for an assessment that...
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...The Culpability of Accounting Fraud: Auditors, Managers or Both ACC 503 – Accounting for Management Abstract The purpose of this term paper is to provide insight to the reader about accounting fraud and on whom the responsibility lays whenever there is an allegation of accounting misconduct. Based on the rash of accounting fraud by major respectable corporations in recent years, no one organization is immune to accounting fraud and it is prevalent in the Federal Government down to the smallest neighborhood business. This paper will, discuss the responsibility of managers and auditors in preventing accounting fraud, show the relationship between internal and external auditors in identifying and preventing fraud, and the responsibility for managers to have strict internal controls within their accounting processes. Introduction Enron, WorldCom, Lehman Brothers, and Waste Management were three of the biggest corporations plagued by accounting improprieties. These companies were at one time multi-billion dollar entities that seemed to have unlimited growth prospects. They also were mega companies that have been involved in some sort of accounting scandal or an instance of accounting fraud. The Journal of Finance and Accountancy lists the definition of fraud as “All multifarious means which human ingenuity can devise, and which are resorted to by one individual to get an advantage over another by false suggestions...
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...long-term objectives. Internal auditors are hired to perform internal audits that look at a company’s operations, investigating fraud, financial reporting, safeguarding assets, and compliance of the laws and regulations set for companies. The internal auditors are employed to improve a company’s internal controls. Effective working internal controls detect and prevent fraud that is tested by internal auditors. A company must evaluate the experience and educational background of a potential internal auditor before making a decision to ensure the auditor is capable of meeting the company’s needs. Justifying the benefits of using an internal auditor Operational auditing is perhaps the most beneficial use of an internal auditor for a company experiencing difficulty controlling accounting functions. Operational auditing focuses on making recommendations on efficient use of resources, achievement of business objectives, and compliance with company policies (Louwers, Ramsay, Sinason, & Strawser, 2007) An operational audit gives you a three dimensional perspective of a company. Financial statements can highlight a problem, but it cannot show how the problem began. The internal auditor can conduct interviews with essential personal to determine what changes are necessary. Additionally, an operational audit may uncover future problems while reviewing the effectiveness of current policies. The operational audit process lends itself...
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...Financial Statement Fraud ACCT 710: Assignment 6-2 Shannon Baxley David Welch September 24, 2011 Table of Contents Abstract………………………………………………………………………………………3 Introduction…………………………………………………………………………………..3 Literature Reviews……………………………………………………………………………5 Conclusion…………………………………………………………………………………..16 References…………………………………………………………………………………...18 Abstract This paper describes financial statement fraud (FSF) and how it may occur within companies. The reason of this study was to research FSF detection and prevention. Research was also done to determine any influences that SAS (Statement on Auditing Standards) No. 82 and SAS No. 99 had on audit programs and the analysis from external auditors. Thirteen scholarly journals were reviewed in order to analyze SAS No. 82 and No. 99 and to show ways to detect and prevent fraud. Results found that managers and/or auditors can create fraud intentionally and unintentionally. There are ways to prevent fraud and educating managers and/or auditors is a good way to make sure fraud does not occur. Introduction Financial statement fraud (FSF) involves the premeditated issuing of phony information on a financial statement (financial statement fraud, 2011). FSF occurs when a company exaggerates assets or revenue, or when it devalues liabilities and expenses (financial statement fraud, 2011). The American Institute of Certified Public Accountants or AICPA defines fraudulent financial reporting as “intentional misstatements or omissions...
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...Financial Reporting and Disclosure Corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company Importance of Corporate Governance Disclosures * Stakeholders are paying more attention to what is reported * The global financial crisis has sharpened the lens through which corporate governance structures are held to account and expectations around transparency. * To drive improvements in reputation * Public understanding of structure and activities * Relationships with the communities * Environmental issues Public disclosure is typically required, at a minimum, on an annual basis though some countries require periodic disclosure on a semi-annual or quarterly basis, or even more frequently in the case of material developments affecting the company. Companies often make voluntary disclosure that goes beyond minimum disclosure requirements in response to market demand. A strong disclosure regime that promotes real transparency is a pivotal feature of market-based monitoring of companies and is central to shareholders’ ability to exercise their ownership rights on an informed basis. Experience in countries with large and active equity markets shows that disclosure can also be a powerful tool for influencing the behaviour of companies and for protecting investors. A strong disclosure regime...
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...Today’s Risk of Fraud: Forensic Accountants Help Protect Identity Theft Megan Laughman Financial Accounting Theory Michael Miller 4/7/15 Abstract The purpose of this study is to explore the recent cyber breaches that have occurred within companies throughout the United States and to look at the different ways these cyber breaches could have been prevented. The research also examines the need for forensic accountants within the business field, as they are able to help protect a company’s credibility and reputation. The study looks at the different internal controls a forensic accountant can incorporate into a company to help prevent cyber breaches and fraud from taking place. The results of the research provide confirmation that forensic accountants are essential in every company in order to help prevent and detour cyber breaches and fraud. Table of Contents Introduction……………………………………………………………………………………4 Literature Review………………………………………………………………………………7 Data Analysis........................................................................................................................…...14 Results and Conclusion…………………………………………………………………………17 References………………………………………………………………………………………19 Today’s Risk of Fraud: Forensic Accountants Help Protect Identity Theft Introduction Technology today is more advanced than it ever has been and almost everyone this day and age owns a computer, tablet, or smart phone. Most Americans utilize their computers, tablets, or...
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...INTRODUCTION Koss is a Delaware corporation with a principal place of business in Milwaukee, Wisconsin. Koss designs, manufactures and sells stereo headphones. KOSS went public in 1965. Over the last ten years, its stock price has ranged from $8 in July 2002, to its peak at $15 in July 2006 to its low at $4 in July 2010. The Chief Executive Officer (CEO), Michael J. Koss (MJK), the founder’s son, and his family directly or indirectly own in excess of 70 percent of the company’s 851,000 shares. A $34 million embezzlement of cash from the KOSS occurred over a 12-year period from 1997 through December 2009. QUESTIONS AND ANSWERS 1. What is the problem in the Koss Corporation case? This case evolves about a wide-ranging fraud committed by senior members of the accounting department of Koss Corporation. Over a period of years, Sachdeva, the Principal Accounting Officer, Secretary and Vice-President of Finance at Koss had stole over $30 million from the Company. Sachdeva used the embezzled funds to finance her extravagant lifestyle and for her personal spendings. Mulvaney, working in concert with Sachdeva, prepared false journal entries to disguise Sachdeva's misappropriation of funds. Sachdeva and Mulvaney attempted to hide the embezzlement in the Company's financial statements by overstating assets, expenses, and cost of sales, and by understating liabilities and sales. Over the last 12 years, Koss never realised the embezzlement made by the culprit. The embezzlement was revealed...
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...Audit Plan ACC 410 I will attempt to set up an audit plan for Keystone Computers & Networks, Inc. In order to set up this audit plan, I will use an outline format that will cover systematically throughout the entire audit. Every audit is unique in which all auditors have their own ways of making their plans. Planning of an audit is a continuous process and that the strategy and planned audit approach may change as new information comes to an auditor’s attention during the course of the audit. The steps that the auditor will approach on the audit plan will be as follows. The auditor will start by planning a quality audit for Keystone Computers & Networks, Inc. The plan will then be to perform a quality audit for Keystone Computers & Networks, Inc. The next step will be to look for any kind of fraud, both financial reporting and misappropriation of assets. The last step will be to prepare the audit report. I will attempt to start from the first of the report and outline all the steps throughout the entire process. I. Introduction A. Setting up an audit plan in the opening paragraph B. Systematic of the format, the auditor will use to prepare an audit plan of Keystone Computers & Networks, Inc. C. Supporting sentences in making the entire audit plan work for the company In order to start an audit the auditor needs to plan everything out before approaching the client’s financial statements and stating the audit, there are steps to perform...
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