USFSP ACG 6936 - Introduction to Business Ethics and Fraud

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Chapter 11: Introduction to Business Ethics and FraudETHICSBUSINESS ETHICSIMPLEMENTING BUSINESS ETHICSSlide 5Slide 6Slide 7COMPUTER ETHICSSlide 9COMPUTER ETHICAL ISSUESSlide 11Slide 12FRAUD & ACCOUNTANTSFRAUDFRAUD TREEFRAUD SCHEMESEMPLOYEE FRAUDMANAGEMENT FRAUDFRAUD TRIANGLEPOSSIBLE QUESTIONNAIREFINANCIAL LOSSES FROM FRAUDSlide 22UNDERLYING PROBLEMSSARBANES-OXLEY ACTANTI-FRAUD PROFESSIONSlide 26Slide 27Slide 28Slide 29Slide 30Slide 31Slide 32Slide 33Slide 34Slide 35Slide 36Slide 37Slide 38Slide 39Slide 40Slide 41Slide 42Slide 43Slide 44Slide 45Slide 46Slide 47Slide 48Slide 49CAN-SPAM Act of 2003Slide 51Organizations for EthicsChapter 11: Introduction to Business Ethics and FraudPertains to the principles of conduct that individuals use in making choices and guiding their behavior in situations that involve the concepts of right and wrong.IT Auditing & Assurance, 2e, Hall & SingletonBusiness EthicsHow do managers decide on what is right in conducting business?Once managers have recognized what is right, how to they achieve it? The necessity to have an articulate foundation for ethics and a consistent application of the ethical standards.Basis of Ethical StandardsIT Auditing & Assurance, 2e, Hall & SingletonEthical Issues in Business [Table 11-1]ReligiousPhilosophicalHistorical IBM combination of all threeEquityExec. salariesPricingRightsHealth (screening)PrivacySexual harassmentEqual opportunityWhistleblowingHonestyConflicts of interestSecurity of data & recordsForeign practices [FCPA]Accurate F/S reportingExercise of Corp. PowerPAC, and politicsWorkplace safetyDownsizing, closures1990 Business RoundtableIT Auditing & Assurance, 2e, Hall & SingletonGreater commitment of top managementWritten codes (policy) that clearly communicate standards and expectationsPrograms to implement ethical guidelinesTechniques to monitor complianceBoeingUses line managers to lead ethics trainingToll-free number to report violationsGeneral MillsPublished guidelines with vendors, competitors, customersJohnson & Johnson Creed integral to its cultureUses surveys to ascertain complianceSAICToll-free number, required training, separate dept.Role of ManagementIT Auditing & Assurance, 2e, Hall & SingletonCreate and maintain appropriate ethical atmosphereLimit the opportunity and temptation for unethical behaviorManagement needs a methodology for including lower-level managers and employees in the ethics schemaMany times, lower-level managers responsible to uphold ethical standardsPoor ethical standards among employees are a root cause of employee fraud and abusesManagers and employees both should be made aware of firm’s code of ethicsWhat if management is unethical? e.g., EnronReported AbusesIT Auditing & Assurance, 2e, Hall & SingletonTypically junior employees (Wall Street Journal)Half of American workers believe the best way to get ahead is politics and cheatingOne-third of a group of 9,175 surveyed had stolen property and supplies from employersEthics Resource Center: 1994 study 41% falsified reports35% committed theftEthical DevelopmentMost people develop a personal code of ethics from family, formal education, and personal experienceGo through stages of moral evolution [Figure 11-2]Making Ethical DecisionsIT Auditing & Assurance, 2e, Hall & SingletonBusiness schools can and should be involved in ethical development of future managersBusiness programs can teach students analytical techniques to use in trying to understand and properly handle a firm’s conflicting responsibilities to its employees, shareholders, customers, and the publicEvery ethical decision has risks and benefits. Balancing them is the manager’s ethical responsibility:Ethical PrinciplesProportionality: Benefits of a decision must outweigh the risks. Choose least risky option.Justice: Distribute benefits of decision fairly to those who share risks. Those who do not benefit should not carry any riskMinimize Risk: Minimize all risks.Levels of Computer EthicsIT Auditing & Assurance, 2e, Hall & SingletonPOP: the exposure to stories and reports in popular mediaPARA: taking a real interest in computer ethics cases and acquiring some level of skill and knowledgeTHEORETICAL: multi-disciplinary researchers who apply the theories of philosophy, sociology, and psychology to computer science, intending to bring some new understanding to the field. That is, ethics research.The analysis of the nature and social impact of computer technology and the corresponding formulation and justification of policies for the ethical use of such technology.IT Auditing & Assurance, 2e, Hall & SingletonA new problem or just a new twist to an old problem?Although computer programs are a new type of asset, many believe that they should not be considered as different form other forms of property; i.e., intellectual property is the same as real property and the rights associated with real property.IT Auditing & Assurance, 2e, Hall & Singleton1. Privacy: Ownership of personal informationPolicies2. Security: Systems attempt to prevent fraud and abuse of computer systems, furthering the legitimate interests of firmShared databases have potential to disseminate inaccurate info to authorized users3. Ownership of Property: Federal copyright laws4. Race:African-Americans and Hispanics constitute 20% of population but 7% of MIS professionalsIT Auditing & Assurance, 2e, Hall & Singleton5. Equity in Access: Some barriers are avoidable, some are notFactors: economic status, affluence of firm, documentation language, cultural limitations6. Environmental Issues: Should firms limit non-essential hard copies?What is non-essential?Disposal of equipment and supplies (toner)7. Artificial Intelligence: Who is responsible for faulty decisions from an Expert System?What is the extent of AI/ES in decision-making processes?IT Auditing & Assurance, 2e, Hall & Singleton8. Unemployment & Displacement: Computers and technology sometimes replace jobs (catch-22, productivity)Some people unable to change with IT, get displaced and find it difficult to obtain new job9. Misuse of Computer: Copying proprietary softwareUsing a firm’s computers for personal benefitSnooping through firm’s files10. Internal Control Responsibility: Unreliable


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USFSP ACG 6936 - Introduction to Business Ethics and Fraud

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