School of Business

Bachelor of Accounting (Hons)

Bachelor in Accounting and Finance (Hons)
Accounting Information System
BBAC1034/BAC3053/3123
TUTORIAL ON TOPIC 10 (ACCOUTING, COMPUTER FRAUD & SECURITY)

TUTORIAL OBJECTIVES:

After finish this tutorial session, students should able to:

1. Integrate knowledge to discuss the solution for questions related to computer

crime and accounting fraud by relate it in AIS practices.

Part A: Structure Questions

1. What are three conditions that lead to fraud? Explain.

Pressure- the condition can be relate to the situation where the accounting employee
suffer from financial difficulties.
Opportunities- An opportunity is the condition or situation that allows a person to
commit and conceal a dishonest act since they have the access into company
information.
Rationalization- Most accounting person have an excuse to commit themselves into
accounting crime.

2. What are the common characteristics of perpetrators?

-Most spend their illegal income rather than invest or save it.
-Once they begin the fraud, it is very hard for them to stop.
-They usually begin to rely on the extra income.

3. What are the 3 preventive action to decrease likelihood of fraud?

Improve detection method-in this preventing approach, company can protect
telephone lines and the accounting system from virus abuses.
Reduce fraud loses- under this preventive action, company need to store
backup copies of

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 4. What are among 4 COMPUTER fraud abusing technique?
Data leakage- the unauthorized transfer of classified information from a
computer.
Data diddling- data diddling occurs when someone with access to information
of some sort changes this information before it is entered into a computer.
Password cracking- Password cracking is the process of recovering password
from data that have been stored in or submitted or into a computer system

5. Indicate the three steps involve fraud.

Theft of something-stealing something valuable. With proper planning.
Conversation of cash-convert whatever they have steal into cash so that they
can use it.
Process of hiding- try to hide the plan.

6. Write down a common activities in relation to accounting fraud.

-Overstating revenue-suppose operating at loss and to cover this situation,
they claim to produce more income. Profits will increase.
-Create fake payroll account and pay more money to personal account.
-Charge items into fake expenses account. Get reimbursed using fake
receipts.

Section B: Case Study of Private Member Owned Country Club

The general manager of private club pleaded guilty to stealing almost USD2 million from
the club through fraudulent payrolls and illegally written checks. He admitted to mail fraud,
wire fraud and money laundering in connection with a scheme to steal from club. Over
period of five years, the GM created fictitious employees, kept former employees on
payroll and placed individuals on the payroll who provided personal services to him. He
made electric payments to theses “ghost employees” and deposited them into personal
accounts. The GM also wrote checks drawn on country club accounts to pay his personal
expenses, including buying vehicles for his personnel use. He wrote checks made
payable to his personal business. The GM and his colleague, the controller of the club
were charge in USA. District court on numerous counts each of wire and mail fraud. The
scheme revealed after the club appointed new treasurer who questioned duplicate
invoices that had presented to her for approval.

Sources:

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Association of Fraud Examiner. 2012 Report to the Nations on Occupational Fraud and
Abuse.

Questions:
1. Who are the potential parties involved in this scheme?
General Manager, department heads, financial controller, previous treasurer.

2. How the GM conducted his scheme?

Creating fake employees and made fake payroll payments and perform illegal checks
written.

3. What is lacking in this country club thus the fraud lasted for five years?
No internal control procedure that lead to lack of detection method.

4. Suggest to the club preventive method that can be consider to prevent such
scheme.
 Send employees to anti-fraud training
 Boards and committee need to study their rule and practice.
 Practice job rotation.
 Send employees for vacation.
 Improve detection method.

-THE END-

Prepared by:
Syed Asnizam Omar
School of Business
UOW Malaysia KDU University College