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ch 5 - notes - Chapter 5 Thursday 7:03 AM AIS Threats...

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Chapter 5 Thursday, February 21, 2008 7:03 AM AIS Threats: Natural and political disasters fires, excessive heat, floods, earthquakes, high winds, war, and attacks by  terrorists Software errors and equipment malfunctions hardware failures, software errors or bugs, operating system crashes, power  outages and fluctuations, and undetected data transmission errors Unintentional acts Accidents caused by human carelessness, innocent errors or omissions, lost,  destroyed or misplaced data, logic errors, systems that do not meet company needs  or are incapable of handling their intended tasks Intentional acts (computer crimes) Sabotage, corruption, misrepresentations, false use, or unauthorized disclosure  of data, misappropriation of assets, financial statement fraud Sabotage - the intent to destroy or harm a system or some of its  components Most frequent type of computer crime is fraud Cookie - data that Web sites store on your computer   Fraud: Any and all means a person uses to gain an unfair advantage over another person For an act to be considered fraudulent there must be: A false statement, representation, or disclosure A material fact, which is something that induces a person to act An intent to deceive; knowledge that the statement was false A justifiable reliance; the person relies on the misrepresentation to take an action An injury or loss suffered by the victim Fraud is committed by an employee or external party Former and current employees (knowledgeable insiders) are much more likely to  perpetrate fraud, and perpetrate larger frauds, than are nonemployees Employees understand a company's system and its weaknesses, they are better  able to commit a fraud, evade detection, and cover their tracks White-collar criminals Fraud losses: 6% of revenue/year Approximately $660 billion in 2004
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Income tax fraud > $200 billion a year Health care fraud > $100 billion a year   Misappropriation of Assets: Often referred to as employee fraud, is the theft of assets and is committed by a person  or group of people for personal financial gain Theft, embezzlement, or misuse of company assets for personal gain EX: billing schemes, check tampering, skimming, and theft of inventory Most common: 92.7% of occupational frauds involved asset misappropriation Median cost = $93,000   Fraudulent Financial Reporting Intentional or reckless conduct, whether by act or omission, that results in materially  misleading financial statements To deceive investors and creditors, to cause a company's stock price to rise, to meet 
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