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ACCOUNTING INFORMATION SYSTEM 1

Accounting information system

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ACCOUNTING INFORMATION SYSTEM 2

Question 1

CASE 1

The companys float was financed by lenders through seeking loan extensions. This was done

through new loans paying off older loans. Lenders were deceived by financial information that

reveals a growing sales over a number of years that translates to substantial profits. However, the

sales and assets documents presented to the auditors were fabricated that does not show the

companys financial worth.

CASE 2

The CEO of a company defrauded the company and shareholders. This was through transfer of

company funds to his personal bank account. The CEO would steal the money by directing

purchasers of newly issued shares to pay the amounts to an account under his control and later

spent the amounts in private use.

Question 2

Case One involves financial statement fraud because their is material misstatements from the

forged sales and assets in the financial information on which the lenders rely to provide loans for

the company

Case Two involves the misappropriation fraud because the CEO transfers the funds of the

company to his private account for personal use

Question 3
ACCOUNTING INFORMATION SYSTEM 3

i. Use of audit trail that will enable the transactions to be trace by the system from

inception to when they end


ii. Segregation of duties where one individual shouldnt control initiation, approval and

authorization and completion of transactions


iii. The existence of an internal audit function which will be able to detect frauds at the

earliest time possible. The department should also be independent of the management
iv. Use of internal control system which will enhance the integrity of accounting records and

safeguard company assets

Question 4

An accounting information system involves the use of computer systems to record accounting

information and produces a report to be used internally or externally

In Case One the system provides an up to date report on the state of the company. Also, the

information is available to different users. However, the data can be incorrectly entered thus

creating incorrect records

In Case Two the system will help because the documents can be automatically generated, and a

timely information produced. The disadvantages are the system can be hacked, and computer

fraud occur because of lack of control


ACCOUNTING INFORMATION SYSTEM 4

References

Romney, M. B. (2008). Accounting information systems. Upper Saddle River: Prentice Hall.

Sajady, H. D. (2012). Evaluation of the effectiveness of accounting information systems.

International Journal of Information Science and Management, 49-59.

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