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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
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
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
Question 3
ACCOUNTING INFORMATION SYSTEM 3
i. Use of audit trail that will enable the transactions to be trace by the system from
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
Question 4
An accounting information system involves the use of computer systems to record accounting
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
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
References
Romney, M. B. (2008). Accounting information systems. Upper Saddle River: Prentice Hall.