Chapter 3 Computer Crimes Fraud and Ethics Part 1

hello and welcome to accounting information systems my name is dr. Annette Moultrie we will be discussed in Chapter three which involves computer crime fraud and ethics again the contents from this video is taken from the book entitled core concepts of accounting information systems 13th edition the authors are apart so can Jacob rose Carolyn Norman after reviewing this video you will be able to explain the difference between cybercrime and frogs discuss the various components of the fraud triangle this examples of cybercrime and fraud as well as proper controls and procedures for preventing them you also describe the profile of cyber criminals and also we will discuss the importance of ethical behavior within the accounting information systems environment managers accountants and investors use computerized information to control valuable resources sell products authenticate accounting transactions and make investment decisions but the effectiveness of beef activities is compromised when the underlying information is incorrect incomplete or falsified this is my digital information is valuable asset that must be protected the more managers and accountants know about cybercrime and fraud the better they are able to assess risk and implement controls to protect organizational assets in this video will discuss some kind of common cyber crimes frogs and other irregularities in order to inform readers of them and viewers of the important threats to accounting information systems and firm resources in the first section of this video we will take closer look at cybercrime and fry and explain the difference between them in the second section we will examine three specific cases involving involving cybercrime and fraud and in the third section of this video we will be able to show you actions organizations can imitate to protect themselves from cybercrime and fraud that is what they can do to recognize potential problems what and what they can do to control them articles in fortune Businessweek Wall Street Journal computer world security focus and wired all testified to the high level of public interest in computer crime at at least three reputable organizations can conduct surveys that help us understand the breadth and the depth of cybercrime first the computer security Institute conducts an annual survey to help determine the scope of cyber crime in the United States the respondents to this survey are computer security practitioners in US corporations government agencies financial institutions medical institutions and universities second KPMG which is global network of professional firms providing on it tax and advisory services they conduct surveys on fraud and business integrity survey participants our business professionals who work for one of the top 2,000 companies listed in dun & bradstreet earn the Association of Certified Fraud examiner's an international professional organization committed to detecting deterring and preventing fraud and white-collar crime they conduct biannual survey and publishes the results in this reports to the net to the nation on occupational Fraud and Abuse but but the participants the survey or its members each of whom provides detail information on one occupational fraud case he or she had personally investigated within the past two years cybercrime what exactly is cybercrime well cybercrime is general term that refers to any criminal activity that involves computers or networks cybercrime can involve direct attacks on computers or networks using such methods as viruses or denial of services attacks or cyber crime can't employ computers or networks to commit crime computers may be used for example to steal identities harass an individual or commit fraud here are just few examples of cybercrime fraud or abuse one graduate student infected campus computer network with virus that eventually disrupted over 10,000 different systems the student did not realize how quickly the virus would get out of control the second one in fit of resentment and anger data entry clerk shattered the screen of computer with shoe Wow here's another programmer change program that calculated dividends paid to shareholders such that the dividends of selected stockholders were reduced and the remaining dividends were paid into an account owned by the programmer the programmer was able to pay himself over $100,000 using this fool what if fraudulent financial reporting fragile 8 financial reporting sometimes called cooking the books so to speak it occurs when corporate officials such as senior ranking executive intentionally falsify accounting records to mislead analysts creditors or investors misappropriation of assets involves feeling assets from company and is usually committed by employees within an organization or through collusion of employees and outside conspirators the CFP calls this type of crime occupational fraud and has developed fraud tree to describe the many ways that employees can misappropriate assets from an organization and we're going to look at some examples cat the type of fraud is larceny or skimming if the direct effect or removal from bank deposit non reporting or under reporting of sales write-ups of legitimate receivables and bad debts what about inventory and all other assets it's considered the misuse or larceny fraud an example is use of corporate limousine or Jack for personal travel pairs are now alone capricious inventory adjustments these are just few of examples of asset misappropriation formal definitions of cybercrime and fraud can be found in law such definitions are important because they determine what law enforcement officials can prosecute as well as how statistics on crimes are accumulated now both federal and state statutes govern cybercrime the most important law is probably the Computer Fraud and Abuse Act of 1986 which was amended in 1994 in 1996 this Act defines cybercrime as any illegal act for which knowledge of computer technology is essential for its profit for pet pet rotation perpetration sorry investigation or prosecution VCF double CF double fraudulent it it involves unauthorized theft use access modification copying or destruction of software or data theft of money by altering computer records or the theft of computer time intent to it illegally to illegally obtain information or tangible property through the use of computers also use or the conspiracy to use computer resources to commit felony theft vandalism destruction of computer hardware trafficking in passwords or other login information for accessing computer extortion that uses computer system as target and there are other legislation or laws that affect computer crime one is the Fair Credit Reporting Act of 1970 this Act requires that an individual they inform why he or she is denied credit there's Freedom of Information Act of 1970 it guarantees individuals the right to see an information gathered about them by federal agencies and the list goes on but these are just few of them few of the federal aid legislation affecting the use of computers now every state now has at least one computer crime law most of the laws have provisions that one define computer terms to define some acts as misdemeanors and three declare other acts as felonies these laws require willful intent for criminal convictions thus words like mr. maliciously intentionally or recklessly often appear in the wording of the computer crime law and willful intent must be established for successful prosecution no one really knows how much how much is lost each year as the result of cybercrime one reason for this is the fact that large proportion of cyber crime takes place in private companies which it is handled as an internal matter despite our lack of complete statistics there are several reasons why experts believe cybercrime is willing one reason is the exponential growth in the use of computer resources such as computer network the Internet smart devices and cloud systems another reason why experts believe cybercrime is growing is because of the continuing black security now there are numerous websites that give step-by-step instructions that detail how to commit cyber crimes for example there are thousands thousands of websites out there that detail how to break into computer system or even this Abell web servers cybercrime is perhaps the is perhaps best understood by studying cases crimes related to accounting systems often involves falsification of data or unauthorized access to data and files major class of accounting related cybercrime involves illegal access to or misuse of the information stored in the accounting information systems in the TRW credit data case which is in the book the information involved was credit data now TRW which is called Experian was it is one of the large credit reporting companies in the United States you have trans you have Equifax and there's experienced now clients of experience or TRW included banks retail stores credit conscious concerns such as diners club American Express MasterCard and Visa and here we get into data diddling data Diddley refers to changing data before during or after they are entered into the computer system the change can't delete alter or add important system data especially for data storage and corporate databases now this is problem and it's problem because these data are often proprietary it may give firm competitive advantage and possibly 0 sometime sometime in organization most valuable assets now again this is problem because these data are often for perfect for proprietary they may give firm competitive advantage and are sometimes an organization's most valuable asset another point in loss protection of individuals credit information and protection of the users of this credit information encompasses much larger issue in 1970 Congress passed the Fair Credit Reporting Act which requires that an individual be told why or why he or she is benign credit the consumer also has right to contest the information maintained by the credit reporting company although there is clearly vast difference between the rights the right to challenge versus the right to change the credit information and we will continue with part two of chapter three in another video again would like to say that this the content of this video is taken from the book entitled core concepts of accounting information systems 30th edition the publisher is wiley and son so in part 2 of the next video will discuss computer hacking how to protect and prevent hacking of your system also we will discuss cybercrime and fraud ethical issues privacy and identity theft