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Questions and Answers
What is an example of a fraud detection technique?
What is an example of a fraud detection technique?
Which of the following is a limitation of internal controls?
Which of the following is a limitation of internal controls?
What type of asset misappropriation involves testing for excessive hours worked?
What type of asset misappropriation involves testing for excessive hours worked?
What can result from weak internal controls?
What can result from weak internal controls?
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What aspect of auditing involves skepticism and the extent of procedures performed?
What aspect of auditing involves skepticism and the extent of procedures performed?
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What is the most common type of fraud, often associated with employee misconduct?
What is the most common type of fraud, often associated with employee misconduct?
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Which of the following is an example of payroll fraud?
Which of the following is an example of payroll fraud?
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What does the GIGO principle refer to in data processing?
What does the GIGO principle refer to in data processing?
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What type of fraud involves altering data to allow illegal access to data files?
What type of fraud involves altering data to allow illegal access to data files?
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Which type of fraud is characterized by stealing or corrupting organizational data?
Which type of fraud is characterized by stealing or corrupting organizational data?
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Which behavior constitutes misuse of company computer resources?
Which behavior constitutes misuse of company computer resources?
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What is a common method of asset misappropriation involving customer checks?
What is a common method of asset misappropriation involving customer checks?
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What is a primary objective of internal control according to AICPA SAS?
What is a primary objective of internal control according to AICPA SAS?
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What is a main concern of business ethics in resolving conflicts?
What is a main concern of business ethics in resolving conflicts?
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Which question do managers consider in business ethics?
Which question do managers consider in business ethics?
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What is one of the main issues in computer ethics?
What is one of the main issues in computer ethics?
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What must exist for a statement to be considered fraudulent?
What must exist for a statement to be considered fraudulent?
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According to a 2004 ACFE study, what percentage of revenues is lost due to fraud?
According to a 2004 ACFE study, what percentage of revenues is lost due to fraud?
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What is a contributing factor to fraud according to the ACFE study?
What is a contributing factor to fraud according to the ACFE study?
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What issue is highlighted by companies like Enron and WorldCom?
What issue is highlighted by companies like Enron and WorldCom?
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What does questionable executive compensation schemes often result in?
What does questionable executive compensation schemes often result in?
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What is a characteristic common to many financial statement fraud schemes?
What is a characteristic common to many financial statement fraud schemes?
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Which entity was created by the Sarbanes-Oxley Act of 2002 to oversee auditors?
Which entity was created by the Sarbanes-Oxley Act of 2002 to oversee auditors?
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What is one of the reforms related to auditor independence in the Sarbanes-Oxley Act?
What is one of the reforms related to auditor independence in the Sarbanes-Oxley Act?
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What type of fraud is usually committed by non-management personnel?
What type of fraud is usually committed by non-management personnel?
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Which type of fraud typically involves creating the illusion of a healthier company through financial statements?
Which type of fraud typically involves creating the illusion of a healthier company through financial statements?
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Which of the following is NOT a type of fraud scheme according to the Association of Certified Fraud Examiners?
Which of the following is NOT a type of fraud scheme according to the Association of Certified Fraud Examiners?
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What type of misconduct is included under the definition of corruption?
What type of misconduct is included under the definition of corruption?
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What was the aim of the Foreign Corrupt Practices Act of 1977?
What was the aim of the Foreign Corrupt Practices Act of 1977?
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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.