Significant areas when issues may be encountered with the adoption of a new technology:

1. Privacy. The creation and maintenance of huge, shared databases make it necessary
to protect people from the potential misuse of data.
2. Security (Accuracy and Confidentiality)
3. Ownership of Property
4. Equity in Access
5. Environmental Issues
6. Artificial Intelligence

7. Unemployment and Displacement

8. Misuse of Computers
5.3 Fraud and Accountants
DEFINITIONS OF FRAUD
Fraud denotes a false representation of a material fact made by one party to another party
with the intent to deceive and induce the other party to justifiably rely on the fact to his or
her detriment. According to common law, a fraudulent act must meet the following five
conditions:
1. False representation. There must be a false statement or a nondisclosure.
2. Material fact. A fact must be a substantial factor in inducing someone to act.
3. Intent. There must be the intent to deceive or the knowledge that one’s statement is
false.
4. Justifiable reliance. The misrepresentation must have been a substantial factor on which
the injured party relied.
5. Injury or loss. The deception must have caused injury or loss to the victim of the fraud.
Auditors encounter fraud at two levels:
Employee fraud, or fraud by nonmanagement employees, is generally designed to directly
convert cash or other assets to the employee’s personal benefit. This usually involves
stealing
something of value. (Misappropriation of assets)
Management fraud is more insidious than employee fraud because it often escapes
detection until the organization has suffered irreparable damage or loss.
Management fraud typically contains three special characteristics:
1. The fraud is perpetrated at levels of management above the one to which internal
control structures generally relate.
2. The fraud frequently involves using the financial statements to create an illusion
that an entity is healthier and more prosperous than, in fact, it is. (fraudulent
reporting)
3. If the fraud involves misappropriation of assets, it frequently is shrouded in a maze
of complex business transactions, often involving related third parties.
The preceding characteristics of management fraud suggest that management can often
perpetrate irregularities by overriding an otherwise effective internal control structure that
would prevent similar irregularities by lower-level employees.
5.4 THE FRAUD TRIANGLE (Fraud Risk Factors)
The fraud triangle consists of three factors that contribute to or are associated with
management and employee fraud. These are:
(1) situational pressure, which includes personal or job-related stresses that could
coerce an individual to act dishonestly; (financial or emotional force)
(2) opportunity, which involves direct access to assets and/or access to information
that controls assets, and; (ability to execute plan w/o being caught)
(3) ethics/rationalization, which pertains to one’s character and degree of moral
opposition to acts of dishonesty. (personal justification)