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8/18/2019 AIS PPT.pptx

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ETHICS,

FRAUD AND

INTERNAL

NTR L


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NTR L

ETHICS● pertains to the principle of

conduct that individuals use in

making choices and guiding

their behavior and situations

that involves the concepts ofright and wrong.


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EQUITY

Executive Salary

Comparable Worth

Product Pricing

RIGHTS

Corporate Due Process

Employee Health Screening

Employee Privacy

Sexual Harassment

Diversity

Equal Employment Opportunity

Whistle!lo"ing

HO#ES$%

Employee and &anagement Con'licts o'(nterest

Security o' Organi)ation Data and*ecords

&isleading +dvertising

,uestionable !usiness Practices in-oreign Countries

+ccurate *eporting o' Shareholder(nterests

EXERCISE OF CORPORATE POWER

Political action Committees

Wor.place sa'ety

Product sa'ety

Environmental (ssues

Divestment o' interests

Corporate political Contribution

Do"nsi)ing and Plant Closures

AREAS OF ETHICALISSUES IN BUSINESS


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COMPUTER ETHICS:●is the analysis of the nature and social

impact of computer technology and the

corresponding formulation and

justification of policies for the ethical useof such technology includes concerns

about software as well as hardware and

concerns about networks connecting

computers as well as computers

themselves.


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3 LEVELS OF

COMPUTERS ETHICSPOP

$HEO*E$(C+/

P+*+


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ISSUES:

ARTIFICIA I!T"I#"!C"

$RI%AC&

'"C(RIT&

)*!"R'+I$ )F $R)$"RT&

",(IT& I! ACC"''"!%IR)!-"!TA I''("'

(!"-$)&-"!T A! I'$AC"-"!T

-I'('" )F C)-$(T"R'


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S+*!+#ESO0/E% +C$ +#D E$H(C+/

(SS1ESConflicts of interest

Full and fair disclosures

e!al co"#liance

Accounta$ilit%

Internal re#ortin! of code &iolations


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FRAUDenotes a false representation of a

material fact made by one party to

another party with the intent to deceive

and induce the other party to justifiably

rely on the fact to his or her detriment.


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TWO LEVELS THAT

AUDITORS ENCOUNTERFRAUD

EMPLOYEE FRAUD MANAGEMENT FRAUD

TAKE

SELL

HIDE


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FRAUD TRIANGLEPressure 2 Opportunity

Ethics Ethics

Pressure Opportunity

#o -raud

-raud


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FINANCIAL LOSSESFROM FRAUD

REASO'S(/Not all fraud is detected

/Of that detected, not all is reported

/In many fraud cases, incompleteinformation is gathered

/Information is not properly distributed to

management or law enforcement authorities/Too often, business organizations decide to

take no civil or criminal action against the

perpetrators! of fraud.


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THE PERPETRATORS OF FRAUDS

Position Percent of Frauds oss)*+

O"ner3Executive 45 657 888

&anager 59 :;8 888

Employee 78 98 888

osses from fraud by position

0osses from fraud by collusion

Per#etrators oss)*+

$"o or more ? ;88 888One ? ::; ;88


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Gender oss)*+

&ale ? 4;8 888

-emale ? ::8 888

0osses from Fraud by #ender

0osses from Fraud by Age

A!e Ran!e oss)*+

A4= 4; 888

4=58 ;8 888

5:5; ::5 888

5=78 :7; 888

7:;8 4;8 888

;:=8 ;88 888

B=8 75; 888


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0osses from Fraud by "ducational evel

Educational e&el oss)*+

High School :88 888

College 4:8 888

Postgraduate ;;8 888


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FRAUD SCHEMES

"raudulent #tatements

THE U',ERYI'G PRO-E.S

0ack of Auditor Independence

0ack of irector Independence

0,uestionable "1ecutive Compensation 'chemes

0Inappropriate Accounting $ractices

Categorie:


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$orruption

TYPES(

2ribery

(llegal ratuity

Conflicts of Interest

"conomic "1tortion

(nvolves giving

o''ering soliciting or

receiving things o' value

to in'luence an o''icial

in the per'ormance o'his or her la"'ul duties2

(nvolves givingreceiving o''ering or

soliciting some thing o'

value because o' an

o''icial act that hasbeen ta.en2

Occurs "hen an

employee acts on behal' o'

a third party during the

discharge o' his 3her duties

or has a sel'interest in theactivity being per'ormed2

(s the use o' 'orce by an

individual or

organi)ation to be

obtain something o'

value


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%sset &isappropriation

TYPES(

''3I--I!#4 involves stealing cash from an

organi5ation before it is recorded on the organi5ation6s

books and records.'CA'+ ARC"!&4 involves schemes in which cash

receipts are stolen from an organi5ation after they have

been recorded in the organi5ation 7s books and records.

'2II!#4 are perpetrated by employees who causes

their employer to issue a payment to a false

supplier8vendor by submitting invoices for fictitious

goods or services.


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'C)-$(T"R FRA(4

' !)! CA'+ -I'A$$R)$RIATI)!'4 involves the theft

or misuse of the victim organi5ation6s non cash assets.

'T+"FT' )F CA'+4 are schemes that involve the direct

theft of cash on hand in the organi5ation.

'"9$"!'" R"I-2(R'"-"!T'4 are schemes in

which an employee makes a claim for reimbursement offictitious or inflated business e1penses.

'$A&R) FRA(4 is the distribution of fraudulent

paychecks to e1istent and8or none1istent employees.

'C+"C3 TA-$"RI!#4 involves changing in some

material way a check that the organi5ation has written to

legitimate payee.


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INTERNAL CONTROLSYSTEM

0To safeguard assets of the firm.0To ensure the accuracy and reliability of

accounting records and information.

0To promote efficiency in the firm6s operation.0To measure compliance with management6s

prescribed policies and procedures.

Obectives2


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MODIFYING ASSUMPTIONS

-A!A#"-"!T R"'$)!'I2IIT&

R"A')!A2" A''(RA!C"

-"T+)' )F ATA $R)C"''I!#

I-ITATI)! )! "FF"CTI%"!"''


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THE PREVENTIVE!DETECTIVE!

CORRECTIVE INTERNALCONTROL MODEL "PDC#

$R"%"!TI%" C)!TR)

"T"CTI%" C)!TR)

C)RR"CTI%" C)!TR)


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EXPOSURES AND

RISK ()posures0is the absence or weakness of a control

that increases the firm6s chance of loss.

c

c c


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Sarbanes – Oxle A!" an#

In"ernal C$n"r$l

0 re:uires management of public

companies to implement an ade:uate systemof internal controls over their financial

reporting process.

0 this includes controls over transaction processing system that feed data to the

financial reporting system.


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INTERNAL CONTROL

FRAME%ORKT+" C)!TR) "!%IR)!-"!T

RI'3 A''"''-"!T

I!F)R-ATI)! A! C)--(!ICATI)!

-)!IT)RI!#

C)!TR) ACTI%ITI"'


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T$o Categorie o% Co&tro'A(ti)itie

:2(n'ormation $echnology Controls

4 roups o' ($ controls

a. #eneral Controls ; pertains to entity wide concerns

such as controls over the data center< organi5ationdatabases< systems development and program

maintenance.

b. Application Controls ; ensure the integrity of

specific systems such as sales order processing<accounts payable and payroll applications.


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Si/ Cate!ories of P0%sical Control Acti&ities

=. Transaction Authori5ation>. 'egregation of uties

?. 'upervision

@. Accounting Records

. Access Controls

B. Independent %erification

42 Physical Controls

; this class of controls relates primarily

to the human activities employed inaccounting system.


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Segregatio& o% D*tie O+,e(ti)e

Control Obective :

Control Obective 4

Control Obective 5

Authori5ation

Authori5ation

ournals

$rocessing

Custody Recording

'ubsidiaryledger

#eneralledger

Transaction

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