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ACC 564 Accounting Information Systems

A comprehensive look at accounting information systems and their role in financial reporting and analysis.

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    FRAUD IN THE AIS 1 ACC 564 Accounting Information Systems Discuss the importance of internal controls in preventing fraud within an Accounting Information System (AIS). Use the case of Fry’s Electronics as a primary example to illustrate how inadequate controls contributed to embezzlement. Based on the insights provided, recommend improvements that could help prevent similar incidents in the future. In your answer, emphasize the role of segregation of duties, documentation practices, and the use of advanced technologies. Word Count Requirement: 1000 - 1200 words

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    FRAUD IN THE AIS 2 Fraud in the AIS Professor Daniel Acheampong ACC 564 Accounting Information Systems December 15, 2013

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    FRAUD IN THE AIS 3 Fraud in the AIS An effective accounting information system is a key factor in protecting organizations from embezzlement or fraud. The accounting information system should be designed and used as a control tool preventing theft internally or externally. Unfortunately, a case of theft or the accounting information system fails to prevent embezzlement, happens often. The failure of an accounting information system occurs due to a flaw in the controls of the system or manipulation of the system by an internal user. According to estimates of the Association of Certified Fraud Examiners, the average company loses seven percent of its revenues to fraud, although much of this fraud involves external parties, such as shoplifting by customers and cheating by suppliers (Arens el al., 2010). In 2011, Ausaf Siddiqui was convicted and sentenced for a four year embezzlement scheme. Beginning in 2004, Siddiqui manipulated the system by completely bypassing all internal controls. As an executive for Fry’s Electronics, he convinced suppliers to pay him directly for products instead of his employer. Ausaf Siddiqui went to his supervisors and convinced them he would be able to obtain products at a reduced rate compared to their current vendors. In actuality, Siddiqui created dummy supplier companies for Fry’s to pay in advance, and then he would purchase the products from suppliers at a different rate than he reported to Fry’s. The scheme was discovered by federal authorities and arrested Siddiqui before his employer was even aware of any issues. Fry’s failed to protect the company’s interests in this particular case. Fry’s gave Siddiqui the opportunity to complete the scheme, when he was allowed as vice president of operations and purchasing to make purchasing decisions while also having authority to approve supplier payments. Ausaf bypassed the accounting information system completely when he authorized

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