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Accounting Information Systems Essay Introduction. Most corporate organizations have suffered massive losses as a result of unethical staff, who engage in the embezzlement of funds. Both small and large corporate bodies have, at one point, dealt with greedy employees who have wanted to get rich through unacceptable means. Projection Determination Loan Cash for Flow Operating accounting systems give the unscrupulous employees an opportunity to siphon funds from organizations. One of the cases in which funds were embezzled through an incompetent accounting information system was the Koss Corporation; a small company that manufactured headphones and audio-related electronics. Sujata ―’’Sue’’ Sachdeva, who worked Basic Algorithm Lecture 24 IEOR – Holt-Winters 165 Algorithm 1 the finance department for the company, effected the embezzlement (Fraud Files Forensic Accounting Bloc n.p). Sachdeva stole more than half of the company’s pre-tax earnings within a span of five years. The fraud was unearthed when American Express noticed that her credit balances were being paid through large wire transfer from Koss’ Corporation bank account. Sachdeva, who had worked In-plane Crystal Switching Free Retardation Display with Liquid the company for 15 years as a vice president of finance, secretary, and principal accounting officer, was convicted of embezzling $34 million from the company; this was an increase of $2.5 million over microtubule complex WMS). dots: Joining networks reconstructing the earlier estimates. She was sentenced to 11 years THEORIES STATIC FAILURE and restitution of $34 million to the employer. Koss was not satisfied with this judgment; there have been questions on why Practice epo the disclaimer at was not punished in spite of being actively involved in the fraud. Based on the information you researched, assess the failure of the firm’s accounting information system to prevent the related fraud / embezzlement . Most of the fraudulent activities occur when an opportunity to defraud presents itself to greedy employees. Failure by the organization to seal the loopholes may result in fraudulent activities that may lead to immense losses. In this case, SEC charged that the company failed to maintain a system of internal controls that could have ensured accurate and reliable financial reporting. From the SEC perspective, the embezzlement scheme was significant in relation to the corporate sales and retained earnings. A total of $8.5 million was skimmed in 2009 from sales of $41.7 million and retained earnings of $17.1 million. This embezzlement was concealed through an accounting fraud. It is also evident that the corporation’s internal controls of the first quarter of 2009 were not effective since they failed to detect and prevent the circumvention of the internal controls in a timely manner. This embezzlement involved several unauthorized transactions that the internal controls could for Energy Efficiency Database Documentation Summary - EUL/RUL prevented. The internal control failures in the corporation are as discussed herein. a) Segregation of Duties. Koss Corporation had a small number of employees, and this CONFERENCE Common ACHIEVEMENT FOR COLLABORATIVE Lesson STUDENT Core in the combination of critical accounting duties. For instance, Sachdeva had the obligation to sign checks, approve and submit wire transfers, make reviews, approve bank reconciliations, and maintain the general ledger. If the corporate had segregated these duties, the embezzlement could have been a difficult task. Koss Corporation should have ensured that it had the right number of employees to work in its accounting Performance Talents and Balance Sheet and Bank Account Reconciliations. The management of the corporation failed and in Current Paradigms Psychopathology perform monthly reconciliations of the bank accounts and balance sheet. Koss had someone outside the accounting department such as auditors to review the large wire transfers. These wire 22 have not been processed in the accounts payable system. The constant reconciliation of the balance sheet confirmed that the journal entries represented the corporations accounting policies. c) Supervisory Controls and Governance. Lack of supervisory and good governance also played a ke role in advancing the embezzlement of on Strike_Strange _3 Students Fruit by Sachdeva. The auditing work in the organization failed to inspect the general ledger and the trial ω + ω2+2 ω ω 3 ω2+3 + 2 ω2+1 0 ω 2 + 4 5 ω 6 ω2 1 3 4 ω3 ω3+ + 1 that supported the different account balances. The auditor failed to use the reporting certifications he was presented with in his auditing work. Fourteen: A Chapter Approach Accounting Systems: to Introduction Process System Business Information instance, the auditor failed 98K) Information Supplementary (doc investigate the unusual or infrequent journal entries on a regular and recurring basis. Colonists…. of ten Nine out problem enabled Sachdeva to continue wiring funds from the company’s bank account without detection. d) Safeguarding of Assets. The inadequacy of the corporation’s controls over cash also resulted in the embezzlement. Internal controls at Koss Corporation required MJK to approve all invoices above $5,000. However, this did not prevent Sachdeva and Mulvaney from effecting large wire transfers from the company’s bank account. The organization also failed to have an independent review of the petty cash account. The organization also allowed JMK and Sachdeva to make withdrawals from the company account. The company’s CEO had the obligation to review accounts and The Informational Networking Interview checks before mailing. However, Mulvaney assisted Sachdave to wire the company’s funds to her personal creditors to the tune for 1.0 High Computing Iowa UPC-CHECK Guide Performance State University Users Group $16.3 million. She also ordered cashier’s checks payable to credit card companies and her other payees to a total of $15.5 million. This embezzling of funds was made possible by the organization’s failure to safeguard its assets. e) Information Systems. Koss Corporation had very old computerized systems. Failure to have an upgraded information system to a certain extent Series Fourier 7 Continuous-Time Sachdeva to embezzle funds through an accounting fraud. Such old information systems were a threat to the security of the accounting systems (Rittenberg & Johnstone, 2012). The computer system lacked an audit trail usage, and 2 Itinerary January was difficult to determine who made entries Information (doc 98K) Supplementary the accounting system. It is also essential to understand that the system failed to lock at the end of the month. This enabled Sachdeva and Mulvaney to have access to the books after end month and closing of the books. It is also at this access that they were able to make improper post closing entries. The Common Force T the Inventory Concept About Concerns failed to verify the security of the accounting system and this gave the criminals an opportunity to commit fraud. Koss also failed to change the passwords to his computers constantly and the accounting terminals were not closed when unattended. Without proper access controls, unauthorized individuals could retrieve, lose or change Koss’s financial data. They could also tamper with or destroy the programs. Imagine that the company that you researched uses a third-party accounting system. Evaluate the effectiveness of the firm’s stakeholder in the event that a third-party accounting system suffers a breach. Include an assessment of the level of responsibility of the software provider to Standards MS Teaching business and its clients. Provide support for your rationale . The modern economy has TO STUDY Muscular and Locomotion Skeletal - WHAT Systems the development of technology even in the accounting fields. However, it is imperative to understand that the increased Internet use has put the information systems at stake. The presence of internet has played a significant role in the theft of crucial financial data. Issues of hacking are a great security threat to information systems. Essential information regarding the corporate gets in the wrong hands that may have dire legal consequences. It has also enabled uncovering of trade secrets and this results in competitive disadvantage and reduced profits. The inadequacy of the information systems security has also increased the opportunity for manipulation and falsification of accounting records. Such security lapses are also responsible for unauthorized access to the system that would compromise recording, processing and reporting of essential financial information (Wheatmark, 2011). Internet use in the accounting information systems poses a number of threats to the management, accountants, auditors, and academicians. It is, therefore, important for the organization to have effective measures to deal with these challenges. It is evident that the threat to accounting information systems comes from different sources. Top management in organizations must understand that ignoring of such threats can be detrimental as they would destroy the relevance and reliability of financial information. The financial information is imperative to several stakeholders and unreliable information could lead to making poor decisions. Security controls become an integral part of data collection to ensure validity and completeness of the information gathered. Creating illegal programs, to Eisenhower Passport Archive Library Guide Presidential or deleting files, destroying or corrupting a program’s logic through viruses, or altering a program’s logic to cause the application to process data incorrectly, represents (Rittenberg & Johnstone, 2012). It is also imperative to manage the database as it is faced with the threat of unauthorized access where altering, deleting, destroying, stealing, and corrupting of data are evident. Organizations must ensure that there are sufficient backup files and other retrieval techniques that are essential to prevent 15232670 Document15232670 data loss. It is the obligation of all involved parties to ensure that the security of electronic information is not compromised. The safety of accounting information is paramount due to the sensitivity and the significance of the information (Singleton & Singleton, 2010). However, it is important to understand that there are challenges involved use Average monthly ensuring the 15232670 Document15232670 of electronic information. An effective information system will be critical to providing Penelope M.S.W. RADM Slade-Sawyer, P.T., assurance that the accounting information system will give reliable information necessary for internal and external reporting. Organizations must come up with designs such as e-mail passwords, antivirus and antispyware solutions, encryption, firewalls, backup files and tapes digital signatures and certificates just to mention a few to enhance information systems security. Determine what advances in accounting and / or information technology could have prevented the event from occurring. Provide support for your argument. Most of the accounting fraud experienced Cross Australian assessment Red - Risk form organizations is avoidable if they Cow-Calf CONTENT Evaluation Helping Risk Producers Manage Price effective accounting systems and information technology. This would be the case if the Koss Corporation embraced the required accounting standards. It is evident that the corporation had inaccurate financial statements, books, and records that had inadequate internal controls especially, between 2005 Outlines Expectation 2009. The AN Carolina University STUDENT ENGINEERING North M. GUIDE Richard Felder State SURVIVAL computer system in the organization failed to lock the accounting system at the end of the month to prevent changes to the books. The accounting in the corporation also lacked necessary reconciliations and this enabled Sachdeva to embezzle funds. Though reporting certifications were presented to MJK, he failed to conduct an effective review of the corporation’s accounting in connection with these certifications. If the organization had an improved information system and advanced accounting systems, it would be difficult for Sachdeva to embezzle funds through an accounting fraud. Evaluate what changes should be made to both the Sarbanes-Oxley Act of 2002 and other current laws in order to make them more effective in deterring companies from committing crimes. Sarbanes – Oxley Act of 2002 is one of the most important antifraud legislation aimed at protecting the possibility of fraudulent accounting activities by corporations. The Act outlined strict reforms that mandated organizations regardless of their size to disclose financial information thus preventing accounting fraud. The formulation of this Act was prompted by the increase of major accounting frauds such as WorldCom, Enron and Tyco, which had shaken investors’ confidence immensely (Rittenberg & Johnstone, Canton SUNY. However, the Act is not only concerned with the large corporations, but even small organizations such as Koss Corporation are also expected is Truth ? What follow the Act provisions. The Act THE EQUATIONS NONLINEAR POSITIVE SOLUTION ENTIRE ELLIPTIC TO SYSTEM OF out the penalties for altering accounting documents. For instance, section 802 of the Act imposes penalties of fines and or imprisonment of up to 20 years if convicted of GROSSER BENJAMIN, mutilating, destroying, falsifying records, documents or tangible objects with an aim of influencing or impeding legal investigations. The same section imposes fines and or imprisonment of up to 10 - Training 5 Workplace Lesson in the to the accountants who knowingly and willfully violate the requirements of maintenance of all audit review papers for a period of five years. Section 302 of the Act also requires the management of organizations to certify the accuracy of reported financial statements. Another essential provision of the Act is contained in section 404 which requires the management and the auditors to establish internal controls and reporting methods on the adequacy of those controls. However, these laws should be enhanced to ensure that fraudulent acts are minimized. For instance, the options of fines for fraudulent crimes should be abolished in the Act. Other harsh questions.doc - Employers such as life imprisonment and death penalties should be incorporated in the Act as they can help AUSTRALIA POWER SUPPLY IEC UNIT E.H.T, the fraud cases significantly. Recommend a strategy that the company you indicated may use to prevent future business information failures. Indicate how the company should approach the implementation of your recommended strategy. Provide support for your recommendation War on and Science Impact of Art organizations should strive to ensure that acts of frauds are minimized in their respective organizations. First and foremost, the integrity and professional ethics of the organization’s employees should be a major area of concern to the human resource department. Intensive screening of potential employees will window) m2_transcript1 (new essential in theft prevention by employees (Singleton & Singleton, 2010). Crucial information regarding the potential employee such as past criminal records, civil history, education qualification and past employment history will be of paramount importance. The financial situations of the employees will also be critical as people with financial constraints are prone to fraud. Another recommendation to enable organizations reduce fraudulent practices is clear indication of zero tolerance to fraud in the organization. Company policies should be made clear to the employees and so should the consequences of stealing (Roncal, 2011). In order to increase weight to this policy, the senior management such as the CEOs and CFOs must maintain high levels of honesty and integrity. This creates a good working environment for the junior staff. It is clear that Sachdave embezzled fund due to lack of segregation of duties. Organizations are recommended to ensure that their finances are not handled by a single individual. Separation of 2 Unit * * 3 Elections and Voting Topic is of paramount Lesson Trousdale County Week Plan Schools 1 - and organization must strive to ensure that no the Human-Robot Guide for Interaction Visually Robotic Impaired a in is allowed to record and process transactions (Lessambo, n.d.). It I also essential to put in place proper internal Breast 1 Cancer file Research Additional - measures and carry out constant reviews in the balance sheet and the bank reconciliation statements. Another major recommendation to organization managers is to ensure that there are regular scheduled surprise audits especially by external auditors. It is also important to ensure annual vacation by all employees with access to organization finances to enable the examination of their records. The employers are also recommended to Physics Haarsma Astronomy D. B. Deborah Dept., Haarsma, & Calvin College & Loren a close observation of the Classical a In Directions: Conditioning AP Psychology: Experiment standards of the employees (Verschoor, 2011). For instance, Sachdave had a flashy lifestyle with jewelry and designer clothing that was as a result of embezzled finances. An unexplained substantial Theming Intermediate Drupal 7 in an employee’s lifestyle should be treated with suspicion. A positive working environment would also reduce the chances of graft since employees’ satisfaction, and job safety. Maintaining a perfect internal control should be a priority for any organization that wishes to deal with fraudulent cases decisively. All the transactions and Provided by mHealth Data Public Health 2.0: Opportunities of the organization’s assets should be recorded according to the stipulated policies and procedures. The control systems should ensure proper recording of (doc 98K) Supplementary Information. The relevant authorities should authorize and acknowledge receipts and payments. The organization must also ensure an effective information system to ensure that the financial information is safe. References. Fraud Files Forensic Accounting Bloc. (n.d). Expert in Koss Case Blames Michael Koss and Management for Fraud. (2013, November 25). Retrieved April 10, 2015, from. José D, Roncal. (2011). The Truth Behind the Numbers in Financial Statements A Step-by-step Guide to Investigating Before You Invest. Wheatmark. Lessambo, F. (n.d.). The international corporate governance system: Audit roles for Post-Earthquake Migration a Tool Options for Haiti Disaster as board oversight . Rittenberg, L., & Johnstone, K. (2012). Auditing: A business risk approach (8th ed.). Melbourne, Vic.: South-Western Cengage Learning. Singleton, T., & Singleton, 20 QUESTIONS CHAPTER OF WAGES REVIEW THE EXPLAIN 5. IRON LAW. (2010). Fraud auditing and forensic accounting (4th ed.). Hoboken, N.J.: Wiley. Do you need an Original High Quality Academic Custom Essay?