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ACCTG 432 - Exam 2 Study Guide

by: Hanna Pham

ACCTG 432 - Exam 2 Study Guide ACCTG 432

Marketplace > Penn State Harrisburg > Accounting > ACCTG 432 > ACCTG 432 Exam 2 Study Guide
Hanna Pham
Penn State Harrisburg

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Chapter 5, 6, 7
Herrick, Keith
Study Guide
accounting 432
50 ?





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This 3 page Study Guide was uploaded by Hanna Pham on Sunday February 14, 2016. The Study Guide belongs to ACCTG 432 at Penn State Harrisburg taught by Herrick, Keith in Spring 2016. Since its upload, it has received 109 views. For similar materials see ACCOUNTING in Accounting at Penn State Harrisburg.


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Date Created: 02/14/16
ACCTG 432 ­ Exam 2 Study Guide The Fraud Triangle: 1. Pressure  This is what causes a person to commit fraud  Most of the time, pressure comes from a significant financial need/problem such as high  medical bills or past due mortgages  Most common examples are gambling debt and maintaining of a lifestyle 2. Opportunity  Opportunity is the ability to commit fraud because fraudsters don’t wish to be caught,  they must also believe their activities will not be detected  Opportunity is created by weak internal control, poor management oversight and through  the use of one’s position and authority  Opportunity is the leg that organizations have the most control over  Examples:   1. Having the bookkeeper sign checks 2. Not reconciling bank accounts on a timely basis or perhaps not reconciling them at all 3. Not paying attention to the accounts receivable that have written off 3. Rationalization  This occurs when an employee justifies why they commit fraud  They do not view themselves as criminals, they see themselves as ordinary, honest people who are caught in a bad set of circumstances  Examples:  1. A person who faces losing their home might say “I deserve to have a nice home” 2. “I was only borrowing the money.” 3. “I had to steal to provide for my family.” Input Fraud:  The alteration or falsifying computer input  Simplest form of computer fraud  Inputting false information Spyware: hardware or software that installed on a computer that can send information from the  users’ computer without their knowledge whenever the computer connects to the internet to  whomever controls the Spyware. Data Leakage: usually occurs when a company or a brand collects data about a website’s  audience and subsequently uses that data without the initial user’s permission Logic Bomb: it designs to harm your computer. It’s a piece of code intentionally inserted into a  software system that will set off a malicious function when specified conditions are met.  Example: A company programmer may want to insert code into a payroll program that  deletes files if her name is not found on the list. This means that files will be deleted if she is  ever fired.  Hacking: occurs when someone gains unauthorized access to a part of you webserver with write  access such as stolen passwords or code Threat: refers to anything that has the potential to cause serious harm to your computer system Exposure:  potential dollar loss from a threat  Risk: anything that could negatively impact the organization’s ability to meet its operational  objectives    Internal Control perform 3 important functions: 1. Preventive Controls: designed to keep errors or problems from occurring in the first  place. These also are proactive controls that can help to ensure departmental objectives  are being meet.  Example:   Segregation of duties  Security of Assets  Verifications, approvals, and authorizations 2. Detective Controls: designed to find errors or problems after they have occurred Example:  Audits  Review of Performance  Physical Inventories  Reconciliations 3. Corrective Controls: try and fix any errors or problems which may have arisen Examples:  Correcting data entry errors  Resubmitting transactions for subsequent processing  Maintaining backup copies of files Inherent Risk: management assertions in the financial statements which might be materially  wrong because of the misstatements if internal control system is not in place to guard against  such misstatements. Also, in the absence of any checks to ensure accuracy of financial  information, financial statements and assertions related to it can also be wrong. Residual Risk: these are the risks that occur after the management implements internal control  Risk Appetite: the type and the amount of risk an organization is willing to accept in pursuit of  its business objectives Data Diddling: involves alteration of existing data. It also is one of the easiest types of crimes to  prevent by using access and accounting controls, auditing, authorization limits and supervision.  Dumpster Diving: a technique that used to retrieve information that could be used to carry out an attack on a computer network Compliance Objectives: help the company follow with all the applicable regulations and laws Operations Objectives: deal with effectiveness and efficiency of company operations and  determine how to allocate resources Reporting Objectives: these objectives help to accuracy, completeness and reliability of company reports Strategic Objectives: these are the goals that match with the company’s mission, create  shareholder value, and support it are set first


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