Research Paper Example: Computer Fraud in Accounting

Abstract

Researchers have made several attempts to find out fraud indicators and to create a procedure for fraud detection or prediction.  The reason being fraud is a huge subject and it results in tremendous losses to the business world. This research is aimed at providing a clear understanding about computer fraud in the accounting environment thereby suggesting solutions to this challenge. Through identifying and understanding the symptoms of computer fraud in accounting, interested parties can be able to understand computer fraud clearly. Symptoms needs to be outlined and re-examined in order to find out clasting solutions to computer crimes such as fraud in accounting. This study will find out ways in which technology can be best used by top management for minimizing or curbing accounting frauds. This report thus finds the reasons for frauds in the accounting environmental and how it can be prevented through proper assistance from top management. This study also finds out the major drivers that motivate employees for committing fraud or stealing in the company.

Key words: fraud, computer, United Arab emirates envinmnent.

1. Introduction

The world is becoming advanced both technologically as well as scientifically and this has resulted in mechanization of operations is impacting the workload of auditors. Accounting which is commonly known as language of business, has also been invaded as well as annexed by the revolution happening in computer technology (Salem, 2012). Therefore, manual bookkeeping as well as accounting methods are becoming redundant, leading the way for computerization in both public as well as private sector. Frauds re becoming highly complicated in this era of technology and at the same time they are becoming tough to be detected mainly when they are highly collusive in nature and when they are being committed by the top management who has the capacity to hide them easily. Thus the auditors have argued that finding out these frauds is not their responsibility (Alleyne & Howard, 2005).

It is a reality that organisations no matter their size they cannot avoid using computers for storing data, analysis and retrieval of it. Despite the fact that computers have been benefiting the organisations in many ways like accuracy of data, time saving, cost saving and storage but along with that the main concern is about the security and protection of data, which can be used for fraudulent purposes against organisations (Gollins, 2015). Most of the frauds in accounting include: the theft of something, even the conversion of cash and the concealment. Generally, in accounting it has been observed that the accounting frauds are done both through Cash schemes and through non-cash schemes (Sinangin, 2002). A cash scheme fraud occurs in organisations where the employees of the organisations generate the false invoicing where the fraudulent invoice is submitted (Lucey, 1979). Expense reimbursement scheme it is a very common fraud practice that is followed by the employees where they generate false invoice of business expense and employers overcompensate the expenses. Another method was non-cash Scheme. Falsified receiving reports, Fraudulent shipments and fraudulent writer offs (ACFE,2010).

1.1 Background of Topic

The term fraud in the earlier auditing standards was connected with the irregularities that incorporated financial reporting of fraudulent nature as well as that related mainly to embezzlements along with employee theft. The accounting system services the tasks as well as records of the entity through which the transactions are being processed along with maintaining financial records. It also has internal control systems that consist of control procedure as well as environment (Lennox, Lisowsky & Pittman, 2013). it includes policies as well as procedures that are being adopted by the management and directors of any entity while achieving the objective of making sure proper business conduct, along with adhering to internal policies , safeguarding the assets , prevention as well as detection of frauds along with errors, accuracy along with completeness of accounting records and on-time preparation of financial information internal controls that can be incorporated in computerized accounting systems. Therefore, this study will be focusing on mainly computer fraud happening within the accounting environment thus suggesting few solutions for overcoming this challenge (Erickson, Hanlon, & Maydew, 2008).

Auditors are just bothered about the policies as well as procedures in the accounting system or the internal control systems which are necessary for the assertions and understanding of financial statements about the relevant aspects of accounting along with the internal control systems (Michelman, Gorman & Trompeter, 2011). In a computer driven environment auditors might prefer to or might find it necessary to use computer assisted auditing techniques. In order to stay highly competitive the UAE organizations replace manual accounting systems with the automated or digitized control strategies (Maltby, 2011). These systems are being manipulated by unscrupulous employees in order to commit frauds in the accounting that are very tough to detect as they are not traced as an individuals responsibility in the organizations.

1.2 Research Questions

Some of the research questions that will be answered through this study include:

How can the business owners or professionals in UAE organizations find out computer frauds?

Do computerized accounting frauds have any impact on the practical applications of accounting environment in UAE organizations?

Can the employers or the employees be held responsible for computer frauds happening in computer accounting systems of UAE organizations?

What strategies can be adopted buy UAE organizations to minimize computer frauds by using effective computerized accounting as well as auditing systems?

2. Literature Review

Computer frauds in accounting environment are a kid of financial statement frauds done by either the employees or the managers having sufficient authority to override the internal controls of the organization. Most of the times such kind of frauds involve deliberate distortions in the accounting records, falsification of transactions, along with misapplication of accounting principles (Salem, 2012). The manner in which these frauds are manifested it is very difficult for the auditors to find these frauds of accounting doe through computer as the perpetrators take all the measures for hiding the resulting irregularities (Holder-Webb, 1995). Looking at the difficulties the auditors face to detect computer frauds in accounting, along with the increasing responsibility to detect them, there is necessity to develop audit procedures or strategies that are focused on detection of frauds (Guan, Kaminski, & Wetzel, 2008).

2.1 Computer Accounting System There exists quite lot similarities between basic accounting system and the computer as both involves three essential phases that are input, processing and output. Integrating computer in the accounting system comprises of business forms. In computer accounting system basic business forms can be made use of just like as they are used for manual systems (Nwohode, 2011). It is just that they are converted into machine readable format so that they can acts as input for basic computer transactions that are recorded on condign forms (Holder-Webb, 1995). In general the transaction transformation of data into information with the help of computer accounting system that is shown below in the diagram:

2.2 Concept of Accounting Accounting is scientific study that maintains records of income and expenditure of the firm, individual or government, along with certain other useful information that is relevant in decision making (John, 2002). As the business grows as well as engages in various activities it is important to revise the accounting system regularly in order to accommodate large number of transactions as well as change in nature of these transaction (Herbert, 2017). Therefore, designing an accounting system is not just a onetime endeavour, but it needs continuous development to make sure that the capability of the systems is quite compatible with the changing business needs.

2.3 Computerization of Accounting System

Choosing the right accounting software is a very crucial responsibility which requires large amount of careful planning while preparing assessment of the organization that needs to be realized in various candidate software programs. Thus an objective evaluation of the accounting system needs to be done in the company before the computerized accounting system is being ordered (Norman, Rose & Rose, 2010). Thus the organization should select an accountant or a team of accountants along with computer experts for doing proper need analysis. Therefore, careful planning for computerized accounting system helps in investing time , decreasing software research cost, evaluation of program as well as improves the likelihood that appropriate question will be asked along with avoidance of fatal errors (Omoniyi, 2002).

Security should be considered very early in the assessment. General ledger modules have a variable sophistication capacity as well as flexibility (Lee, 2012). Since most of the accounting packages them need modules, accounting systems require software as a building block? Careful planning is needed for computerized accounting system as it will assist in investing the time, evaluation of program, declining the cost for searching software and also improves the likelihood that the fatal errors will be removed (Herbert, 2017). The computerized accounting system offers numerous benefits to the people who are related or involved with them like the developers, users and managers.

2.4 Computer Fraud Information technology is seen to be a glut on the whole as it puts a big question mark against the relevance of conventional or traditional auditing; mainly computers are responsible for raising this kind of crucial question. The reason being heavy dependence on computers poses several challenges related to security measures and it is the global concern that computer frauds are claiming millions (John, 2002) . Every year hundreds of million dollars to even several billions are embezzled form various US corporations (Erickson, Hanlon, & Maydew, 2008). Computer related frauds have caused lots of losse...