Question

“Accounting Systems and Accruals"

Please respond to the following:

For this week's Discussion, research the most common threats to a computerized accounting system using the Internet and/or Strayer databases. Be prepared to discuss.

Upon examination of the greatest threats to a computerized accounting system, suggest two (2) preventive measures or remedies that protect the system and/or mitigate any negative impacts to the system. Provide a rationale for your response.

Your boss is concerned that the company’s computerized accounting system is vulnerable to attack. After reviewing the system, you’re in agreement. Write a brief report (approximately one [1] paragraph in length) of how someone might hack into your systems and commit fraud with the accruals. What major damages to the company’s financial statements could result from such a fraud?”

Answer 1

The most common threats to a computerized accounting system are security breaches andunethical employees. Accounting systems contain confidential information that should be kept safe and secure at all times. When accounting data is changed or deleted it can create havoc in the accounting department, by calling into question the reliability or accuracy of all data. This can be frustrating to all involved so it is best to have security measure in place to prevent securitybreaches. Security breaches can consist of viruses, and worms. These security breaches are a direct result of hacking. Someone can hack into the computer system and attach viruses to emailsand other accounting files during an electronic transaction. This can interfere with program codesof the accounting system.

Measures or remedies to protect system:

1. Protect with passwords. This may seem like a no-brainer, but many cyber attacks succeed precisely because of weak password protocols. Access to all equipment, wireless networks and sensitive data should be guarded with unique user names and passwords keyed to specific individuals. The strongest passwords contain numbers, letters and symbols, and aren’t based on commonplace words, standard dictionary terms or easy-to-guess dates such as birthdays. Each user should further have a unique password wherever it appears on a device or network. If you create a master document containing all user passcodes, be sure to encrypt it with its own passcode and store it in a secure place.

2. Design safe systems. Reduce exposure to hackers and thieves by limiting access to your technology infrastructure. Minimize points of failure by eliminating unnecessary access to hardware and software, and restricting individual users’ and systems’ privileges only to needed equipment and programs. Whenever possible, minimize the scope of potential damage to your networks by using a unique set of email addresses, logins, servers and domain names for each user, work group or department as well.

Predict the major potential resulting damage(s) to the company’s financial statements from the fraud.If I wanted to commit fraud by altering my company’s accruals I would do so by hacking into their accounting system. I would put a virus in their system that would copy all passwords and log in information. The changes will be made in the accounts according to my will. Such as paying myself for time not worked, increasing my salary, giving myself bonuses. The major potential resulting damage to the company’s financial statements from the fraud would be losingthe credibility of accounts which can be devastating stockholders and investors.

major damages to the company’s financial statements could result from such a fraud”

a. Financial statement fraud can result in the loss of confidence in the companies by customers, shareholders, potential shareholders, and lenders. This in turn can lead to financial collapse and massive losses to shareholders.

b. The damage is the same as to shareholders, except the shareholders are the ones who bear the ultimate loss. However, company employees can lose their jobs, and pension funds can be destroyed, leaving employees with no money to retire.

c. Executives and directors can have their reputations permanently damaged; they can lose their pension funds along with regular company employees, they can lose their jobs; they can be permanently barred by the SEC from serving as officers in public companies, and they can be fined an given prison sentences.

d. Investors can lose confidence in the market as a whole. This might cause the flight of capital to other markets.

e. Society is served by orderly financial markets. They are essential to the formation and distribution of capital in the economy. Damage to the markets, and damage to shareholders and lenders, damages society as a whole.