5 Computer Fraud

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Chapter 5

Computer Fraud
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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.
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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


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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.
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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@ 6.he .read*ay Commission7.
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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
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.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.
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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


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.he Fraud .riangle
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.hree conditions that are
present *hen Fraud occurs.
Pressure
4oti%ation or incenti%e to
commit 'raud
.ypes+
1.Employee
Financial
Emotional
"i'estyle
2.Financial
Industry conditions
4anagement
characteristics
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#pportunity
Condition or situation that
allo*s a person or
organi,ation to+
1.Commit the
'raud
2.Conceal the
'raud
"apping
Iiting
8.Con%ert the
the't or
misrepresentatio
n to personal
gain
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Aationali,ations
Justi)cation o' illegal beha%ior
1.Justi)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.
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Computer Fraud

/ny illegal act in *hich <no*ledge o' computer


technology is necessary 'or+

Perpetration

In%estigation

Prosecution
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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
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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
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