INF2004F Summary Notes.docx

Accountantsauditors are expected to provide assurance

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- Accountants/auditors are expected to provide assurance that the security architecture (policies, standards, procedures and controls) ensures the confidentiality and availability of information assets - Failure to comply with customer protection rules could result in transactions being cancelled at the insistence of customer- could even be sued - Auditors must be able to show an audit trail of authenticity and integrity of information - Auditors have to ensure that requirements of record retention are maintained - Auditors have to verify/validate that public key infrastructure is utilised - Auditors have to physically check and ensure valid digital certificates are utilised to digitally sign email orders Threats to AIS Natural and political disasters – e.g.) Google has many different server locations around the world to ensure server is always online Software errors and equipment malfunctions – impact on customer satisfaction & organisation’s reputation Unintentional acts – human errors; check for errors; controls in place Intentional acts – crime, fraud E.g. threats to pastel? - viruses
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Fraud categories (Misappropriation of assets & Fraudulent financial reporting) Defining fraud; any means a person uses to gain an unfair advantage over another person and includes: - A false statement, representation or disclosure - A material fact which induces a victim to act (a fact that a reasonable person would consider germane to a decision to be made as distinguished from an insignificant, unimportant, trivial detail - An intent to deceive - Victim relied on the misinterpretation - Injury/loss suffered by the victim - Fraud = white collar crime - 2 categories: misappropriation of assets and fraudulent financial reporting 1. Misappropriation of assets: Theft of organisation’s assets – inventory, cash, intellectual property etc. Trickery or deceit (deceiving) rather than by force The act of asset theft, concealment and conversion must be present Divided into two – theft of cash OR non-cash assets May occur under different instances: Before recorded in the books and records of an organisation (skimming) e.g. inventory sale is made, but no transactions recorded or invoice issued- in this case, running an inventory report won’t help. Therefore have to do a physical stick count- red flag would be declining inventory levels without an increase in sales; Assets are still held by the organisation e.g. larceny/misuse of equipment, inventory, cash etc.; During the process of purchasing – e.g.) pay more/pay what should not be paid 2. Fraudulent financial reporting: ‘cooking the books’ – fictitious values; overstate assets; understate liabilities etc. Conditions for fraud: Fraud triangle theory (Donald Cressey, 19530 2 criteria: - Initially people are accepting responsibilities of good faith and - Circumstances make them violate the trust 3 factors (pressure, opportunity and rationalization) must be present for offense to take place Conditions for Fraud:
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