...Auditors’ Ability to Assess Fraud Risk on Their Ability to Detect the Likelihood of Fraud Nahariah Jaffar* Faculty of Management, Multimedia University Arfah Salleh Graduate School of Management, Universiti Putra Malaysia Takiah Mohd Iskandar Faculty of Economics and Business Management, Universiti Kebangsaan Malaysia Hasnah Haron School of Management, Universiti Sains Malaysia ABSTRACT The Malaysian Approved Standards on Auditing, AI 240 on “Fraud and Error” (MIA, 1997) requires the auditor to assess the risk of fraud and error during the audit of financial statements. Based on the risk assessment, the auditor should design audit procedures to obtain reasonable assurance that misstatements arising from fraud and error that are material to the financial statements taken as a whole are detected. Inability of the external auditor to detect material misstatements, particularly intentional misstatements, may expose the external auditor to litigation. The present study aims to examine the effect of the external auditor’s ability to assess fraud risk on his/her ability to detect the likelihood of fraud. An experimental approach is adopted by sending case materials to audit partners and audit managers attached to auditing firms operating in Malaysia. The result shows that in a high fraud risk scenario, the external auditor’s ability to assess fraud risk has a positive effect on his/her ability to detect the likelihood of fraud, whereas in a low fraud risk scenario not. The...
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...COURSE CODE: BKAS2013 COURSE NAME: ACCOUNTING INFORMATION SYSTEMS PREREQUISITE: BKAS1013 IT IN ACCOUNTING AND BKAF1023 INTRODUCTION TO FINANCIAL ACCOUNTING __________________________________________________________________________ 1. SYNOPSIS This course introduces students to the important concepts of Accounting Information Systems (AIS). The course contents are divided into three main sections. The first section introduces the basic concepts of AIS including its objectives, components, and subsystems. The concept of E-business as an emerging trend of conducting business in the new era of information technology (IT) is also covered in this section. The second section discusses in depth the common features of transaction processing systems such as revenue and accounts receivable, purchase and accounts payable, manufacturing and inventory, human resource as well as general ledger and reporting system. Integration of selected accounting software will also take place at this stage to enable students apply the AIS concepts into practice. This section also introduces students to the techniques of documenting accounting systems and database modeling tools. The final section discusses the emerging issues in computer crimes, computer ethics and concept of internal controls in organization. Application of internal controls concept into transaction cycles is later discussed. 2. COURSE OBJECTIVES Upon...
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...ASSIGHNMENT #2: AIS ATTACKS AND FAILURES: WHO TO BLAME Introduction In this paper, I am going to present about an accounting information system attacks and failures: who to blame. I am also going to discuss the following related topics in the following order: Firstly, I will take a position on whether a firm and its management team should or should not be held liable for losses sustained in a successful attack made on their AIS by outside source. Secondly, I will suggest who should pay for the losses, to whom, and state why. Thirdly, I will give my opinion regarding the role, if any; the federal government should have deciding and enforcing remedies and punishment. Finally, I will evaluate how AIS can contribute or not to contribute to the losses. A Firm and its Management Team Should Be Held Liable for the Losses According to the Control Objectives for Information and Related Technology (COBIT) framework and the Trust Services framework, achieving organization’s business and governance objective require adequate control over IT resources. IT processes must be properly managed and controlled in order to produce information that satisfies the seven criteria: effectiveness, efficiency, confidentiality, integrity, availability, compliance and reliability. These IT processes are grouped into the following four management activities or domains (Romney & Steinbart, 2012). 1. Plan and Organize (PO), 2. Acquire and Implement (AI), 3. Deliver and Support (DS)...
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...ACC 444 EXAM 1 Chapter 1 * Introduction * System: set of two or more interrelated components that interact to achieve a goal. (systems consist of subsystems that support the larger system) * Goal conflict: when subsystem is inconsistent with the goals of another subsystem or with the system as a whole * Goal congruence: when a subsystem achieves its goals while contributing to the organization’s overall goal * Data: facts that are collected, recorded, stored and processed by an information system (activities, resource, people) * Information: data that have been organized and processed to provide meanings and improve the decision-making process (better decisions quantity and quality of information increase) * Information overload: when limits to the amount of information human mind can absorb and process are passes, resulting in a decline in decision making quality and increase in cost of providing that information * Information technology(IT): information designers use to help decision makers more effectively filter and condense information * Value of information: the benefit produced by the information minus the cost of producing it * Seven characteristics of useful information: relevant, reliable, complete, timely, understandable, verifiable, accessible (RRCTUVA) * Information needs and business process * Business process: a set of related, coordinated and structured activities and tasks that are performed by a person or by...
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...However, within the corporate world, AI is widely used for complex problem-solving and decision-support techniques in real-time business applications. The business applicability of AI techniques is spread across functions ranging from finance management to forecasting and production. In the fiercely competitive and dynamic market scenario, decision-making has become fairly complex and latency is inherent in many processes. In addition, the amount of data to be analyzed has increased substantially. AI technologies help enterprises reduce latency in making business decisions, minimize fraud and enhance revenue opportunities. Definition of AI AI is a broad discipline that promises to simulate numerous innate human skills such as automatic programming, case-based reasoning, neural networks, decision-making, expert systems, natural language processing, pattern recognition and speech recognition etc. AI technologies bring more complex data-analysis features to existing applications. There are many definitions that attempt to explain what Artificial Intelligence (AI) is. I like to think of AI as a science that investigates knowledge and intelligence, possibly the intelligent application of knowledge. Knowledge and Intelligence are as fundamental as the universe within which they exist, it may turn out that they are more fundamental. One of the aims of AI is said to be the investigation of human cognition and AI is part of Cognitive Science. AI is really an investigation into the...
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...PART Overview of Accounting Information Systems Chapter 1 The Information System: An Accountant’s Perspective 3 Introduction to Transaction Processing 31 Ethics, Fraud, and Internal Control 91 Chapter 2 I Chapter 3 1 CHAPTER The Information System: An Accountant’s Perspective nlike many other accounting subjects, such as intermediate accounting, accounting information systems (AIS) lacks a well-defined body of knowledge. Much controversy exists among college faculty as to what should and should not be covered in the AIS course. To some extent, however, the controversy is being resolved through legislation. The Sarbanes-Oxley Act (SOX) of 2002 established new corporate governance regulations and standards for public companies registered with the Securities and Exchange Commission (SEC). This wide-sweeping legislation impacts public companies, their management, and their auditors. Of particular importance to AIS students is the impact of SOX on internal control standards and related auditing procedures. Whereas SOX does not define the entire content of the AIS course, it does identify critical areas of study that need to be included for accountants. These topics and more are covered in the chapters of this text. The purpose of this chapter is to place the subject of AIS in perspective for accountants. Toward this end, the chapter is divided into three major sections, each dealing with a different aspect of information systems. The first section explores the...
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...|Exam 1 Review Notes | AIS (This is not exhaustive – just a minimum for study) Study the end of chapter MC in the AIS. Study probs 1.4, 1.8, 2.5, 2.6, 2.8, 3.2, 3.6, 3.16(2,3,7,8,9), 5.3, 5.4, 5.8 Porter’s primary value chain activities Porter’s basic strategic positions Seven characteristics of useful information Five major transaction cycles The data processing cycle Budgeting Source data automation G/L, control accounts, subsidiary ledgers, General Journal Context diagram System flowchart Flowchart symbols Structured, semi-structured, unstructured decision making Data Flow Diagrams (DFDs) and symbols Database Management System (DBMS) and Relational DBMS Schemas and subschemas Database administrator Benefits of DBMS technology Batch processing Online real-time processing Primary key, foreign key, attributes, tuples Data warehouse Data Dictionary Data Definition Language (DDL) Data Manipulation Language (DML) Data Query Language (DQL) Update, Insertion, Delete Anomaly Entity integrity and Referential integrity The following questions are representative of the mc questions that will be on the exam. 1. Which of the following motivators would be a good indication of financial pressure that would contribute to employee fraud? a. a big change for the better in an employee's lifestyle b. an employee suddenly acquires lots of credit cards ...
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...ACC 564 Entire Course Accounting Information Systems http://homeworkfy.com/downloads/acc-564-entire-course-accounting-information-systems/ To Get this Tutorial Copy & Paste above URL Into Your Browser Hit Us Email for Any Inquiry at: Homeworkfy@gmail.com Visit our Site for More Tutorials: (http://homeworkfy.com/ ) ACC 564 Week 2 Assignment 1 – Information Needs for the AIS In 1967, Russell Ackoff presented a classical analysis of misinformation in management (Ackoff’s Management Misinformation Systems, Case 1-1, pg. 21 of the text). Now, you need to fast-forward to the present. After reading the case, craft your own version of misinformation in management by developing five (5) key incorrect assumptions that management makes about its accounting information systems. For this assignment, research the Internet or Strayer databases for information related to improper assumptions concerning accounting information systems. Write a five to seven (5-7) page paper in which you: Based on your research, assess how corporate leaders may make improper assumptions related to accounting information systems and the related information. Indicate the most negative potential impacts on business operations related to these assumptions. Provide support for your rationale. Suggest three to four (3-4) ways in which organizational performance may be improved when information is properly managed within a business system. Provide support for your rationale. Evaluate the level of...
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...ACC 564 Entire Course Accounting Information Systems http://homeworkfy.com/downloads/acc-564-entire-course-accounting-information-systems/ To Get this Tutorial Copy & Paste above URL Into Your Browser Hit Us Email for Any Inquiry at: Homeworkfy@gmail.com Visit our Site for More Tutorials: (http://homeworkfy.com/ ) ACC 564 Week 2 Assignment 1 – Information Needs for the AIS In 1967, Russell Ackoff presented a classical analysis of misinformation in management (Ackoff’s Management Misinformation Systems, Case 1-1, pg. 21 of the text). Now, you need to fast-forward to the present. After reading the case, craft your own version of misinformation in management by developing five (5) key incorrect assumptions that management makes about its accounting information systems. For this assignment, research the Internet or Strayer databases for information related to improper assumptions concerning accounting information systems. Write a five to seven (5-7) page paper in which you: Based on your research, assess how corporate leaders may make improper assumptions related to accounting information systems and the related information. Indicate the most negative potential impacts on business operations related to these assumptions. Provide support for your rationale. Suggest three to four (3-4) ways in which organizational performance may be improved when information is properly managed within a business system. Provide support for your rationale. Evaluate the level of...
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...Kudler Fine Foods relies on Accounting Information System (AIS) for its daily business operations. Due to the complexity of the business today, Kudler needs to understand the potential risks and how to mitigate them by applying internal controls to the AIS. This paper will discuss the risks and internal controls of Kudler’s AIS. The Risks to Kudler’s AIS Risk represents the possibility of a loss or harm to an organization (Raval & Fichadia, 2007, p.29). In developing effective AIS, risks should be analyzed and identified to protect the company’s assets and to promote operational efficiency. Kudler’s AIS uses four systems. They are Accounts Payable (AP), Accounts Receivable (AR), Inventory, and Payroll systems. These four systems have potential risks that may arise due to separation of duties conflict, unauthorized access, and human errors. At Kudler, the AP system is designed as an automated system. The potential risks to the system are the accuracy of the invoices’ approval and the segregation of duties conflict in adding or changing and approving vendors’ details. The sales process at Kudler involves payment by cash and credit. Even though the AR system is designed as an automated system, potential risk occurs when separation of duty conflicts exist in receiving and depositing the cash. The Inventory system at Kudler is also designed as an automated system. The potential risks are unauthorized modification of inventory level, separation...
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...significant determinant of how well basic functions are performed, as technology has prompted changes in organizational design that affect the quality and timeliness of intelligence and decision making, and the organizational goals as a whole. With quality of information, good decisions will be made and this will enhance the successful attainment of organizational goals and objectives. Information system has become a very powerful agent of change and it is transforming the way businesses are conducted and the way companies operate. Therefore, accountants, as information management professionals, must therefore be major players in technology revolution in every organization. However, within an organization, the Accounting Information System (AIS) is resulted from the structured and successful integration of three...
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...1. Why did some previous attempts to use artificial intelligence technologies fail? What key differences of the new AI-based applications versus the old cause the authors to declare that automated decision making is finally coming of age? One reason that previous attempt to use artificial intelligence failed was because it was difficult to extract knowledge from the experts. It was also very expensive to keep running,so this definitely played a role in the demise of previous attempts. Due to limited capabilities there was a lack of business applications. There was also a lack of interest in the technology all together. Some of the key differences were the reduction of overhead, which primarily was due to maintenance. The new AI also was embeded directly into the workflow and was not a separate step in the process. The new one also translates into action. 2. What types of decisions are best suited for automated decision making? Provide several examples of successful applications from the companies in this case to illustrate your answer. There are many decisions best suited for automated decision making, but the first that stands out to me is that inputs are available electronically rather than human input. There is also more frequency in automated decision making. The automated decision making problems are not so broad, but are more narrow and well defined. One example of successful application is bank credit customers can complete the application within five minutes, at which...
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...you don't understand its language - Accounting. What rules impact a business' Accounting Information System? What types of compliance is required? Discussion 2 In this graded discussion, we will be examining the operation of the Accounting Information System (AIS) with the use of problems and exercises from your textbook. The goal is to cover all of the requirements to ensure an opportunity for your successful completion of Course Project. Let's start with Exercise 1-17A. Read about CoffeeShop Doughnuts and select one of the four requirements to answer. week 2 Discussion 1Last week, we discussed "The Language of Business" and why the accounting information system is important in business. This week, we are going to look at the mechanics of how it all works. It might be a bit easier if we started with an example which would be the Genie Car Wash, Inc. in Chapter 2 of your textbook. Pick a transaction from Genie and let us know how it impacts the accounting equation. Make sure to identify the two accounts impacted. Why is it important to record your selected transaction? Discussion 2 In this graded discussion, we will be examining the operation of the Accounting Information System (AIS)...
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...ACG 3401 Study Guide Exam 1 Accountants Roles * Management accountant * Internal auditor * Information systems auditor * External auitor * Tax accountant * Fraud examiner * Managerial Accountant * Provides info for mngmt decisions * Knowledge base: * * * * Business processes * Accounting information sustems * Internal controls * Managerial accouting techniques * Impact of accounting on behaviors Advocate for best info possible for making the best decision for the firm IMA Information criteria: 1. 2. 3. 4. Forward looking 5. Timely 6. Responsibility oriented Planning Systems (budgets) control systems (implement the course of action and evaluate) Management accounting answers questions related to : * * * * * Important customers ( profitability) * Substitute products * Critical capability * Funding ( growth) Value ( Adam Smith) * Value in use- derive value by using the product * Value in exchange- derive value from the exchange of that product for another good or service. Generic Value Chain Model: 1. 2. 3. 4. *Customer need identitified* 5. Identify the market and create the product/ service ( innovation cycle) 6. Build the product or service and deliver the product or service ( operations cycle) 7. Service the customer ( post sales service cycle) ...
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...scrutinizing and penalizing businesses for inappropriate accounting scandals. Recent incidents of fraud have been noted in the media weekly. The new field of accountants has companies like Enron, Tyco, and WorldCom to thank for their new demand. The employees of these companies have plot, planned and manipulated the system. They have used schemes like the Ponzi schemes, embezzlement, false advertising, and Spanish prisoners. Fraud Investigators go beyond just criminal charges in court they are also used in family court. They use their skills when couples are getting a divorce; martial fraud is used when spouses don’t show all their assets. (Marden and Darner, 2006) The mystic new field forensic accountants are called in to investigate businesses for white collar crimes. Forensic accountant’s job is to investigate business fraud, incorrect financial reporting, and illegal investment schemes. Professionals interested in obtaining a job in forensic accounting have to process the following skills: Effective written/oral communication skills, strategic critical thinking, financial knowledge and background, and leadership skills, professional and ethical behavior. (Wells. 2003) It is important that professionals have these skills in order to meet the growing number of fraud cases in business. They must be well trained in the rules of evidence, financial data, Accounting Information System (AIS) software, as well as be able to convince a judge that they should be viewed as expert in their...
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