Understanding Computer Fraud in the Accounting Environment - Paper Example

Proposed research topic: Understanding computer fraud in the accounting environment as it applies to United Arab Emirates companies.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

PURPOSES

The purpose of this study is to understand computer fraud within an accounting environment as it applies to United Arab Emirates Companies. Management of companies have a responsibility of designing and implementing controls that will ensure computer fraud is prevented, deterred and detected. Establishment and maintenance of internal controls as well as adopting of accounting policies that are sound will play a major role in dealing with computer fraud in an accounting environment. Auditors have a responsibility of planning and performing an audit to ensure that financial statements are free of any types of errors. Errors may arise from financial reporting that are fraudulent. Computer fraud not only causes tremendous losses to organizations, but it also creates morale problems among employees in an organization. Computer fraud in the accounting environment represents a critical issue in the accounting profession, not only in the United Arab Emirates but all over the world. There is a need for auditors to take a leading role in fighting computer fraud in the accounting environment. With that regard, auditors have to detect and prevent any form of fraud within their respective organizations. Auditors should also develop adequate accounting systems that have appropriate internal controls to combat the problem of computer fraud.

Forensic auditors in the United Arab Emirates are limited with regard to legal expertise, and they also lack training that is necessary for identification of illegal activities. The paper intends to make computer fraud in the accounting environment easy to understand by auditors so that appropriate efforts can be put in place to address the problem of computer fraud. In this paper I will address the magnitude of computer fraud in United Arab Emirates, causes of computer fraud, measures that can be put in place to address the problem of computer fraud in the accounting environment among other aspects.

Understanding computer fraud in an accounting environment will play a major role in improving security measures that will, in turn, reduce incidences of computer fraud among United Arab Emirates companies. Companies need to be more vigilant when it comes to risks associated with computer fraud in the accounting environment. Recent studies have proved that crimes associated with computer systems can go on for many years without being detected costing companies millions and billions of Dirham before revelations are made. Auditors and accountants should equip themselves with information technology skills that will ensure facts about computer fraud are uncovered, and complex financial information on companies is revealed. Companies ought to employ certified fraud examiners and forensic professionals who would ensure that computer fraud in the accounting environment is detected early enough before huge losses are incurred.

BACKGROUND

Advances in information technology have revolutionized many aspects of society, including the business world. Electronic businesses where an exchange of goods and services is done on an electronic platform began in the 1950s with the development of early computers. However, e-business did not become popular until in 1990s with the development of the World Wide Web. Use of technology to enrich and support various aspects of life has spread globally. The paperless accounting environment has been made possible courtesy of advancement in information and technology. Technology has improved business activities, but at the same time, it has its downsides. Technology has introduced new types of crimes that are novel to many people (Libby et al., 2011).

There are potential problems of integrating information systems in business operations. Business managers must be aware of potential problems that are associated with the electronic business. Businesses must be aware that integration of information technology in business can make their accounting systems susceptible to computer fraud. Increased use of computers in the keeping of financial records has created more opportunities for computer fraud in the accounting environment to take place. Better computer security can play a major role in dealing with computer fraud in the accounting environment. Computer fraud in the accounting environment is likely to be high in systems that are sloppily designed and operated in a sloppy manner. Development of accounting systems in a proper manner will make sure that the systems are protected from any form of intentional misrepresentation as well as any form of external interference (Thibodeau & Freier, 2014).

Fraud has become profoundly complicated in this era of advanced information technology. Fraud is increasingly becoming difficult to detect especially if it involves collusion among top management who can easily go ahead to conceal their deeds. Given that computer fraud can be perpetrated and concealed by top management; auditors have argued that the responsibility to detect fraud should not be their responsibility because by doing so, they may ruffle their bosses feathers. In the recent past, there has been news that computer fraud in United Arab Emirates accounting environment is on the rise. The news has been filled with reports about the increase in computer-related fraud in the accounting environment. Many companies have been directly affected by computer fraud. Billions of dirham are lost every year to computer fraud. Suspicious activity reports (SAR) filed by banks have been on the increase in the last few years (Laykin, 2013).

Computer fraud is a big problem in the accounting environment. The digital environment offers new opportunities for perpetrators of computer fraud. The digital environment also offers new opportunities for individuals who are involved in examining fraud. The digital environment has changed manners in which internal auditors plan and complete their work; it has also changed ways in which external auditors ascertain risks and perform their work. Computer fraud in an accounting environment can be classified into internal fraud and external fraud. Internal fraud includes efforts by employers to embezzle funds from a company that they work in. Internal fraud is mostly detected by internal auditors or a group of fraud detection individuals through internal audits and data mining efforts. External fraud is often done by a misrepresentation of financial statements with an intention to mislead interested parties and stockholders. Examples of external fraud include overstatements of inventory, manipulation of financial statements and failure to adequately disclose fraud (Jones, 2013).

Under the computerized information systems, accountants and auditors have different roles. Computers have made the auditing process more accurate. Therefore, accountants are expected to integrate their auditor skills with computer skills so as to be efficient in their work under computerized information systems. Evolution of information systems has compelled auditors to develop auditing skills that are in line with information systems. Fraud auditors are experts in detecting and documentation of frauds. Fraud is possible in any accounting environment, even one that has tight controls. A visible part of fraud may involve small amounts of money, but an invisible portion of fraud may involve a substantial amount of money. Red flags of fraud can be discerned if one looks carefully, deep enough and long enough within an accounting information system (Kimmel et al., 2011).

SCOPE

The scope of this study is within United Arab Emirates, among its companies. I will engage with auditors and several individuals who work in the accounting departments of various United Arab Emirates. I will seek to obtain information from them about their view of their accounting environment with regard to computer fraud. I will obtain information from my study participants about the possible causes of computer fraud in their companies. I will obtain information from my study participants about the prevalence of computer fraud in their organizations. I will also obtain information from the study participants about the financial cost of computer fraud to their organizations. I will obtain from my study participants if their companies have put measures in place to deal with the problem of computer fraud. I will obtain information from the study participants by use of both questionnaires and interviews. Interviews will ensure that the study participants provide in-depth insight into various elements of computer fraud in the United Arab Emirates accounting environment.

THEORETICAL FRAMEWORK

Characteristics of computerized accounting systems

Computerized accounting systems are a natural progression from the manual accounting systems that have for many systems been used in accounting environments. However, computerized accounting systems have special features and characteristics that make them more susceptible to crime. There is a need to understand features of computerized accounting systems. Characteristics of computerized accounting systems include connectivity, concentrated data, and positions of trust. Computerized accounting systems exhibit a high level of connectivity. For computer systems to function properly, computers must be connected. An increase in connectivity of information technologies has made computer systems more vulnerable to computer crimes. Computer systems do collect and combine from all organizational departments. Individuals who are entrusted with managing computer systems are likely to manipulated by the individuals to their benefit without changes being discovered (Hall, 2016).

Computer fraud in the accounting environment

Computer fraud in the accounting environment refers to irregularities which incorporate fraudulent financial reporting together with employee embezzlement and theft. Fraudulent financial reporting refers to deliberate misrepresentation of financial statements. Most of the time, individuals who take part in computer fraud in the accounting environment are individuals who authority to override an organizations internal controls. This type of fraud also involves intentional distortion of accounting records, misapplication of accounting principles and falsification of business transactions. Detection of computer fraud in accounting environment is difficult to detect because perpetrators do their best to conceal irregularities that result from their deeds. Based on the fact that auditors face many challenges in the detection of financial fraud yet there is an increase in the need for computer fraud to be detected, there is a need to develop audit strategies and procedures that are centered on fraud detection (Boyle & Panko, 2013).

There has been a rise in computer fraud in the accounting environment in the last two decades. The accounting profession has continued to be concerned on how best to manage fraud. In the United Arab Emirates, reports indicate that computer fraud is pervasive and it plagues both small and large organizations. Reports suggest that a typical company loses about 5% of their annual revenue to computer fraud. Incidences of fraud have increased so have incidents of fraudulent schemes. Given the high incidences of fraud, organizations feel the pressure and responsibility to come up with initiatives that will ensure detection of incidents of computer fraud a success. Even though auditors have shown interest to take up additional responsibilities of detecting fraud in their organizations, their training for forensic auditing has been lacking, and it needed to be developed (Chuprunov, 2013).

Recent reports abo...