Chapter 5
Computer Fraud
Copyright 2012 Pearson Education, Inc. publishing as Prentice all
5!1
"earning #b$ecti%es
E&plain the threats 'aced by modern in'ormation
systems.
(e)ne 'raud and describe the process one 'ollo*s to
perpetuate a 'raud.
(iscuss *ho perpetrates 'raud and *hy it occurs,
including+
the pressures, opportunities, and rationali,ations that
are present in most 'rauds.
(e)ne computer 'raud and discuss the di-erent
computer 'raud classi)cations.
E&plain ho* to pre%ent and detect computer 'raud and
abuse.
Copyright 2012 Pearson Education, Inc. publishing as Prentice all 5!2
Common .hreats to /I0
1atural (isasters and .errorist .hreats
0o't*are Errors and2or E3uipment 4al'unction
5nintentional /cts 6uman Error7
Intentional /cts 6Computer Crimes7
Copyright 2012 Pearson Education, Inc. publishing as Prentice all 5!8
9hat Is Fraud:
;aining an un'air ad%antage o%er another person
/ 'alse statement, representation, or disclosure
/ material 'act that induces a person to act
/n intent to decei%e
/ $usti)able reliance on the 'raudulent 'act in *hich a
person ta<es action
/n in$ury or loss su-ered by the %ictim
Indi%iduals *ho commit 'raud are re'erred to as *hite!
collar criminals.
Copyright 2012 Pearson Education, Inc. publishing as Prentice all 5!=
Forms o' Fraud
4isappropriation o' assets
.he't o' a companies assets.
"argest 'actors 'or the't o' assets+
/bsence o' internal control system
Failure to en'orce internal control system
Fraudulent )nancial reporting
>?intentional or rec<less conduct, *hether by act or
omission, that results in materially misleading )nancial
statements@ [Link] .read*ay Commission7.
Copyright 2012 Pearson Education, Inc. publishing as Prentice all 5!5
Aeasons 'or Fraudulent Financial
0tatements
1. (ecei%e in%estors or creditors
2. Increase a companyBs stoc< price
8. 4eet cash Co* needs
=. ide company losses or other problems
Copyright 2012 Pearson Education, Inc. publishing as Prentice all 5!D
.read*ay Commission /ctions to Aeduce
Fraud
1. Establish en%ironment *hich supports the integrity o'
the )nancial reporting process.
2. Identi)cation o' 'actors that lead to 'raud.
8. /ssess the ris< o' 'raud *ithin the company.
=. (esign and implement internal controls to pro%ide
assurance that 'raud is being pre%ented.
Copyright 2012 Pearson Education, Inc. publishing as Prentice all 5!E
0/0 FGG
/uditors responsibility to detect 'raud
5nderstand 'raud
(iscuss ris<s o' material 'raudulent statements
/mong members o' audit team
#btain in'ormation
"oo< 'or 'raud ris< 'actors
Identi'y, assess, and respond to ris<
E%aluate the results o' audit tests
(etermine impact o' 'raud on )nancial statements
(ocument and communicate )ndings
0ee Chapter 8
Incorporate a technological 'ocus
Copyright 2012 Pearson Education, Inc. publishing as Prentice all 5!H
.he Fraud .riangle
Copyright 2012 Pearson Education, Inc. publishing as Prentice all 5!G
.hree conditions that are
present *hen Fraud occurs.
Pressure
4oti%ation or incenti%e to
commit 'raud
.ypes+
[Link]
Financial
Emotional
"i'estyle
[Link]
Industry conditions
4anagement
characteristics
Copyright 2012 Pearson Education, Inc. publishing as Prentice all 5!10
#pportunity
Condition or situation that
allo*s a person or
organi,ation to+
[Link] the
'raud
[Link] the
'raud
"apping
Iiting
[Link]%ert the
the't or
misrepresentatio
n to personal
gain
Copyright 2012 Pearson Education, Inc. publishing as Prentice all 5!11
Aationali,ations
Justi)cation o' illegal beha%ior
[Link])cation
I am not being
dishonest.
2./ttitude
I donBt need to
be honest.
8."ac< o' personal
integrity
.he't is %alued
higher than
honesty or
integrity.
Copyright 2012 Pearson Education, Inc. publishing as Prentice all 5!12
Computer Fraud
/ny illegal act in *hich <no*ledge o' computer
technology is necessary 'or+
Perpetration
In%estigation
Prosecution
Copyright 2012 Pearson Education, Inc. publishing as Prentice all 5!18
Aise o' Computer Fraud
1. (e)nition is not agreed on
2. 4any go undetected
8. igh percentage is not reported
=. "ac< o' net*or< security
5. 0tep!by!step guides are easily a%ailable
D. "a* en'orcement is o%erburdened
E. (iKculty calculating loss
Copyright 2012 Pearson Education, Inc. publishing as Prentice all 5!1=
Computer Fraud Classi)cations
Input Fraud
/lteration or 'alsi'ying input
Processor Fraud
5nauthori,ed system use
Computer Instructions Fraud
4odi'ying so't*are, illegal copying o' so't*are, using so't*are in an
unauthori,ed manner, creating so't*are to undergo unauthori,ed
acti%ities
(ata Fraud
Illegally using, copying, bro*sing, searching, or harming company
data
#utput Fraud
0tealing, copying, or misusing computer printouts or displayed
in'ormation
Copyright 2012 Pearson Education, Inc. publishing as Prentice all 5!15