Business and Computer Ethics Quiz

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Questions and Answers

What is an example of a fraud detection technique?

Employee Satisfaction Surveys

Payment to Fictitious Vendors (correct)

Equipment Maintenance Checks

Management Override

Which of the following is a limitation of internal controls?

Enhanced training programs

Regular audits

Possibility of honest errors (correct)

Automated bookkeeping systems

What type of asset misappropriation involves testing for excessive hours worked?

Expense Report Fraud

Inventory Theft

Credit Card Misuse

Payroll Fraud (correct)

What can result from weak internal controls?

Loss of company reputation Signup and view all the answers

What aspect of auditing involves skepticism and the extent of procedures performed?

Auditor’s Response to Risk Assessment Signup and view all the answers

What is the most common type of fraud, often associated with employee misconduct?

Asset misappropriation Signup and view all the answers

Which of the following is an example of payroll fraud?

Expense reimbursement theft Signup and view all the answers

What does the GIGO principle refer to in data processing?

Garbage in, garbage out Signup and view all the answers

What type of fraud involves altering data to allow illegal access to data files?

Program fraud Signup and view all the answers

Which type of fraud is characterized by stealing or corrupting organizational data?

Database management fraud Signup and view all the answers

Which behavior constitutes misuse of company computer resources?

Personal use of computer during work hours Signup and view all the answers

What is a common method of asset misappropriation involving customer checks?

Lapping Signup and view all the answers

What is a primary objective of internal control according to AICPA SAS?

Ensure asset safeguarding Signup and view all the answers

What is a main concern of business ethics in resolving conflicts?

Choosing between conflicting interests Signup and view all the answers

Which question do managers consider in business ethics?

How to determine what is right? Signup and view all the answers

What is one of the main issues in computer ethics?

Data privacy Signup and view all the answers

What must exist for a statement to be considered fraudulent?

A false representation Signup and view all the answers

According to a 2004 ACFE study, what percentage of revenues is lost due to fraud?

6% Signup and view all the answers

What is a contributing factor to fraud according to the ACFE study?

Collusion among employees Signup and view all the answers

What issue is highlighted by companies like Enron and WorldCom?

Lack of auditor independence Signup and view all the answers

What does questionable executive compensation schemes often result in?

Short-term strategies Signup and view all the answers

What is a characteristic common to many financial statement fraud schemes?

Inappropriate accounting practices Signup and view all the answers

Which entity was created by the Sarbanes-Oxley Act of 2002 to oversee auditors?

Public Company Accounting Oversight Board (PCAOB) Signup and view all the answers

What is one of the reforms related to auditor independence in the Sarbanes-Oxley Act?

More separation between attestation and non-auditing activities Signup and view all the answers

What type of fraud is usually committed by non-management personnel?

Employee Fraud Signup and view all the answers

Which type of fraud typically involves creating the illusion of a healthier company through financial statements?

Management Fraud Signup and view all the answers

Which of the following is NOT a type of fraud scheme according to the Association of Certified Fraud Examiners?

Insider trading Signup and view all the answers

What type of misconduct is included under the definition of corruption?

Illegal gratuities Signup and view all the answers

What was the aim of the Foreign Corrupt Practices Act of 1977?

To ensure accurate records and internal controls Signup and view all the answers

Study Notes

Business Ethics

Conflicts can arise between employees, management, and stakeholders, necessitating ethical guidelines.
Two key questions in business ethics: How do managers decide what's right, and how do they achieve it?
Four main areas of business ethics are not specified in the text.

Computer Ethics

Concerns the societal impact of computer technology (hardware, software, and telecommunications).
Key issues include privacy, security (accuracy and confidentiality), property ownership, equitable access, environmental concerns, artificial intelligence, job displacement, and computer misuse.

Legal Definition of Fraud

Requires a false representation of a material fact with intent to deceive, resulting in justifiable reliance causing injury or loss.

Factors Contributing to Fraud

The provided text does not list the factors.

2004 ACFE Study of Fraud

Estimated fraud losses at 6% of revenues, approximately $660 billion.
Losses varied by position, with higher losses attributed to men, colluding employees, and those with advanced degrees.

Enron, WorldCom, Adelphia: Underlying Problems

Lack of auditor independence.
Lack of director independence.
Questionable executive compensation schemes (short-term stock options).
Inappropriate accounting practices (e.g., Enron using special purpose entities).

Sarbanes-Oxley Act of 2002 (SOX)

Created the Public Company Accounting Oversight Board (PCAOB).
Enhanced auditor independence.
Strengthened corporate governance and responsibility.
Increased disclosure requirements.
Established new federal crimes related to document destruction, securities fraud, and whistleblowers.

Employee vs. Management Fraud

Employee fraud: Non-management personnel taking company assets.
Management fraud: Higher-level manipulation of financial statements to misrepresent the entity's health, often involving complex transactions.

Fraud Schemes (According to ACFE)

Fraudulent statements: Misrepresenting financial statements.
Corruption: Bribery, illegal gratuities, conflicts of interest, and extortion.
Asset misappropriation: Most common type, often by employees (e.g., skimming, cash larceny, billing schemes, check tampering, payroll fraud, lapping).

Computer Fraud Schemes

Involve theft, misuse, or misappropriation of assets through altering computer records, software, information, or hardware.

Fraud at Different Stages of Information Processing

Data Collection: Easily manipulated input data (GIGO principle).
Data Processing: Program (altering programs or using viruses) and operational fraud (misuse of company resources).
Database Management: Altering, deleting, or stealing data.
Information Generation: Stealing, misdirecting, or misusing output (including scavenging).

Internal Control Objectives (AICPA SAS)

Safeguarding assets.
Ensuring accuracy and reliability of accounting records.
Promoting operational efficiency.
Measuring compliance with management policies.

Auditor's Responsibility for Detecting Fraud

Includes addressing fraudulent financial reporting and asset misappropriation. Responses include engagement staffing, professional skepticism, and procedure adjustments based on risk assessments.

Fraud Detection Techniques

Techniques are listed for detecting payment to fictitious vendors, payroll fraud, and lapping of accounts receivable.

Limitations of Internal Controls

Potential for honest errors, collusion, management override, and changing conditions.

Exposures of Weak Internal Controls (Risk)

Asset destruction, theft, information corruption, and system disruption.

Preventive, Detective, and Corrective Controls

The text does not explicitly detail these control types.

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Description

Explore the foundational concepts of business and computer ethics through this engaging quiz. Test your understanding of ethical dilemmas, fraud definitions, and the impact of technology on society. Examine how these areas intersect and their implications in the modern world.