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    Chapter 3 ETHICS FRAUD AND INTERNAL CONTROL

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    Xela Mae Bigornia
    This document discusses business ethics and internal controls. It addresses why ethics are important in business, potential conflicts that can arise, and four main areas of business ethics including computer ethics. It defines fraud and the fraud triangle. It also discusses the Sarbanes-Oxley Act, fraud schemes, internal control objectives, and types of preventative, detective, and corrective controls.

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    Chapter 3 ETHICS FRAUD AND INTERNAL CONTROL

    Uploaded by

    Xela Mae Bigornia
    44 views16 pages
    This document discusses business ethics and internal controls. It addresses why ethics are important in business, potential conflicts that can arise, and four main areas of business ethics including computer ethics. It defines fraud and the fraud triangle. It also discusses the Sarbanes-Oxley Act, fraud schemes, internal control objectives, and types of preventative, detective, and corrective controls.

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    Chapter-3-ETHICS-FRAUD-AND-INTERNAL-CONTROL

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    This document discusses business ethics and internal controls. It addresses why ethics are important in business, potential conflicts that can arise, and four main areas of business ethics including computer ethics. It defines fraud and the fraud triangle. It also discusses the Sarbanes-Oxley Act, fraud schemes, internal control objectives, and types of preventative, detective, and corrective controls.

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    Download as pptx, pdf, or txt
    44 views16 pages

    Chapter 3 ETHICS FRAUD AND INTERNAL CONTROL

    Uploaded by

    Xela Mae Bigornia
    This document discusses business ethics and internal controls. It addresses why ethics are important in business, potential conflicts that can arise, and four main areas of business ethics including computer ethics. It defines fraud and the fraud triangle. It also discusses the Sarbanes-Oxley Act, fraud schemes, internal control objectives, and types of preventative, detective, and corrective controls.

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    ETHICS,

    FRAUD, AND
    INTERNAL
    CONTROL
    BUSINESS ETHICS

     Why should we be concerned about ethics in the business world?

     Ethics are needed when conflicts arise—the need to choose

     In business, conflicts may arise between:


     employees
     management
     stakeholders

     Litigation
    FOUR MAIN AREAS OF BUSINESS ETHICS
    COMPUTER ETHICS
     Concerns the social impact of computer technology
    (hardware, software, and telecommunications).

     What are the main computer ethics issues?


     Privacy
     Security—accuracy and confidentiality
     Ownership of property
     Equity in access
     Environmental issues
     Artificial intelligence
     Unemployment and displacement
     Misuse of computer
    LEGAL DEFINITION OF FRAUD
     False representation - false statement or disclosure

     Material fact - a fact must be substantial in inducing someone


    to act

     Intent to deceive must exist

     The misrepresentation must have resulted in justifiable


    reliance upon information, which caused someone to act

     The misrepresentation must have caused injury or loss


    FRAUD TRIANGLE
    Pressure Opportunity
    No Fraud

    Pressure Opportunity

    Ethics

    Fraud Ethics
    SARBANES-OXLEY ACT OF 2002
    Its principal reforms pertain to:
     Creation of the Public Company Accounting Oversight Board
    (PCAOB)
     Auditor independence—more separation between a firm’s attestation
    and non-auditing activities
     Corporate governance and responsibility—audit committee members
    must be independent and the audit committee must oversee the
    external auditors
     Disclosure requirements—increase issuer and management
    disclosure
     New federal crimes for the destruction of or tampering with
    documents, securities fraud, and actions against whistleblowers
    FRAUD SCHEMES
    Three categories of fraud schemes according to the
    Association of Certified Fraud Examiners:

    Fraudulent Asset
    Corruption
    statements Misappropriation
    INTERNAL CONTROL OBJECTIVES ACCORDING
    TO AICPA SAS
    1. Safeguard assets of the firm
    2. Ensure accuracy and reliability of accounting
    records and information
    3. Promote efficiency of the firm’s operations
    4. Measure compliance with management’s
    prescribed policies and procedures
    MODIFYING ASSUMPTIONS TO THE INTERNAL
    CONTROL OBJECTIVES

    1. Management Responsibility

    2. Reasonable Assurance

    3. Methods of Data Processing


    THE INTERNAL CONTROLS SHIELD
    PREVENTIVE, DETECTIVE, AND
    CORRECTIVE CONTROLS
    SAS 78 / COSO

    Describes the relationship between the


    firm’s:
    1. Internal control structure,
    2. Auditor’s assessment of risk, and
    3. The planning of audit procedures
    Five Internal Control Components: SAS 78 / COSO

    1. Control environment
    2. Risk assessment
    3. Information and communication
    4. Monitoring
    5. Control activities
    TWO TYPES OF IT CONTROLS
    1. General controls — pertain to the entity wide
    computer environment.

    2. Application controls — ensure the integrity of


    specific systems
    SIX TYPES OF PHYSICAL CONTROLS
    1. Transaction Authorization
    2. Segregation of Duties
    3. Supervision
    4. Accounting Records
    5. Access Control
    6. Independent Verification

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