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 EthicsHow 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]ReligiousPhilosophicalHistorical IBM combination of all threeEquityExec. salariesPricingRightsHealth (screening)PrivacySexual harassmentEqual opportunityWhistleblowingHonestyConflicts of interestSecurity of data & recordsForeign practices [FCPA]Accurate F/S reportingExercise of Corp. PowerPAC, and politicsWorkplace safetyDownsizing, closures1990 Business RoundtableIT Auditing & Assurance, 2e, Hall & SingletonGreater commitment of top managementWritten codes (policy) that clearly communicate standards and expectationsPrograms to implement ethical guidelinesTechniques to monitor complianceBoeingUses line managers to lead ethics trainingToll-free number to report violationsGeneral MillsPublished guidelines with vendors, competitors, customersJohnson & Johnson Creed integral to its cultureUses surveys to ascertain complianceSAICToll-free number, required training, separate dept.Role of ManagementIT Auditing & Assurance, 2e, Hall & SingletonCreate and maintain appropriate ethical atmosphereLimit the opportunity and temptation for unethical behaviorManagement needs a methodology for including lower-level managers and employees in the ethics schemaMany times, lower-level managers responsible to uphold ethical standardsPoor ethical standards among employees are a root cause of employee fraud and abusesManagers and employees both should be made aware of firm’s code of ethicsWhat if management is unethical? e.g., EnronReported AbusesIT Auditing & Assurance, 2e, Hall & SingletonTypically junior employees (Wall Street Journal)Half of American workers believe the best way to get ahead is politics and cheatingOne-third of a group of 9,175 surveyed had stolen property and supplies from employersEthics Resource Center: 1994 study 41% falsified reports35% committed theftEthical DevelopmentMost people develop a personal code of ethics from family, formal education, and personal experienceGo through stages of moral evolution [Figure 11-2]Making Ethical DecisionsIT Auditing & Assurance, 2e, Hall & SingletonBusiness schools can and should be involved in ethical development of future managersBusiness 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 publicEvery ethical decision has risks and benefits. Balancing them is the manager’s ethical responsibility:Ethical PrinciplesProportionality: 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 riskMinimize Risk: Minimize all risks.Levels of Computer EthicsIT Auditing & Assurance, 2e, Hall & SingletonPOP: the exposure to stories and reports in popular mediaPARA: taking a real interest in computer ethics cases and acquiring some level of skill and knowledgeTHEORETICAL: 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 informationPolicies2. Security: Systems attempt to prevent fraud and abuse of computer systems, furthering the legitimate interests of firmShared 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 notFactors: 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 softwareUsing a firm’s computers for personal benefitSnooping through firm’s files10. Internal Control Responsibility: Unreliable
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