Question:
Examine the Issue of Computer Fraud in the Accounting Environment.
The business environment is undergoing continual change with the advent of new technologies to carry out the business operations. The development of innovative technological tools and devices are rapidly transforming the business environment. The business organizations are implementing the use of computerized systems and process in each and every aspect to achieve fast and accurate results. The accounting field is also largely influenced by the introduction of new technological devices in the business environment. The accounting process involves computation and interpretation of complex financial data and therefore is largely relying on the use of automated systems for achieving better results in short span of time. Thus, the accounting process and procedures have been eased largely with the impact of technological devices (Coderre, 2009).
However, the increasing use of computerized systems and processes is also associated with the risk of occurrence of computer fraud. This is because the accounting environment is vulnerable to many frauds with the use of computer technologies such as manipulation of financial data by the accounting mangers or theft of critical data by the competitors through the use of hacking devices. Thus, the breach of safety by the use of computing environment is one of the most prominent issues that business organizations have to face with the use of technological devices. The loss of confidential information to the outside parties will negatively impact the business performance. Also, the mis-representation of financial data by the accounting mangers becomes easy with the use of computerized devices. Therefore, it is very important for the business organization to adopt adequate safety measures for prevention of computer fraud (Gelinas, Dull, Wheeler and Hill, 2017).
The present research, in this context, addresses the issue of computer fraud in accounting environment. The research takes into account the problem of occurrence and variance of new types of frauds in the usage of computers in the accounting environment. The research specifically targets the application of the same in the commercial organizations of the UK and tries to analyze the problems the organizations in the concerned place experience. The research also proposes the types of techniques that can be used by the business organizations to tackle the issue of computer fraud and suggest the possible and more effective ways for resolving the issue.
The study tries to address several key questions of substantial concern regarding the aspect of frauds in the computer usage in the perspective of the organizations in the UK. The key research questions are as follows:
Hutchings (2013) stated that the business organizations around the world are increasingly adopting the use of computer technology and devices for performing their various operational tasks and activities. The use of latest computing technologies and devices helps the business organizations to improve the efficiency of their business processes and thus achieving higher output and improved profitability. The business organizations are increasingly adopting the use of computer technologies in the accounting department for improving the efficiency of their accounting processes. The increasing adoption and implementation of the information technology systems in the accounting and financial processes of the organizations have also caused the occurrence of various ethical issues. The most important ethical issue involved with the use of computer technology systems in the accounting processes is fraudulent behavior. The greater use of information technology devices has caused an increasing concern towards the occurrence of computer fraudulent activities (Hutchings, 2013).
Kassem & Higson (2012) stated that the computer technologies are used almost in every aspect by the business organizations to perform various types of tasks. The business organizations operate in a highly dynamic environment and therefore the use of information technologies help them to perform their operational activities in a flexible manner. The most emerging business field where computer technologies are increasingly being used is the accounting department. The information technologies and tools have become an intrinsic part of the financial processes for developing the financial statements and reports. The accountants are using the latest technology tools and devices for developing the general purpose financial statements. The main reason for the increasing use of information technology in the field of accounting is improved speed and accuracy for achieving the financial results. Thus, the business corporations through the use of computer technology and devices are able to easily solve the complex financial problem and issues (Kassem & Higson, 2012).
Cooper, Dacin, & Palmer (2013) stated that the increasing use of computer technologies in accounting environment is largely contributing towards the occurrence of accounting frauds. The accounting fraud with respect to the use of computer technologies can be regarded as the misuse of technology in mis-interpreting the financial information for achieving specific results or outcomes. The increasing use of innovative information technology devices is also leading to the problems of computer frauds in business environment. In this context, the theory of fraud triangle stated that frauds in a general context occur in steps. The steps, as mentioned by the authors are namely the pressure which the individuals feel, like that of debt problems and lifestyle problems. Another step is the opportunity for committing fraudulent activities, the ability of rationalizing the crime by the fraudulent individuals, cumulatively which leads to the frauds that occur in any business organization in a general framework (Cooper, Dacin, & Palmer, 2013).
As per the views of Gbegi & Adebisi (2014) there is a large monetary impact of the accounting frauds on the business organizations and therefore lead to the occurrence of large amount of loss. The computer technologies are increasingly finding use in each aspect of the financial processes of the businesses such as in accounting transactions, accounts payable, inventory management and financial reporting. Therefore, there is huge monetary impact of the computer frauds in the accounting environment on the business organizations. The effective internal control and good employment practices can help the business organizations in preventing the occurrence of fraud and mitigating the losses. The internal audit committee developed within the business organization would help in assessing the risks associated with the use of computing technologies. The establishment of audit committee would help in examining the business processes and technologies and thus identifying the risks of computer frauds in advance (Gbegi & Adebisi, 2014).
In accordance with the Nigrini (2012) the development of latest information technology tools is also leading to the development of various types of new devices that can helps in preventing the occurrence of computer frauds. The forensic accounting is one such technology tools that can be used by businesses for identification of computer frauds. The forensic accounting can help in prevention of digital frauds such as identity theft, malwares and spywares identification, website cloning, cyber stalking and corrupting viruses. Thus, businesses should adopt the use of fraud detection digital tools for reducing the chances of occurrence of computer frauds. The business organization should emphasis on strengthening the internal control within the workplace for effective fraud prevention. The development of a strong ethical culture within the workplace is most important for establishing an effective internal control. It is therefore most important for the management of business organizations to develop a strong ethical culture through developing strong business values. The implementation of strong business values would help in promoting an ethical and transparent business environment and thus preventing the fraud occurrence (Nigrini, 2012).
Pedneault, Silverstone, Rudewicz & Sheetz (2012) stated that it is very important for business organizations to implement and monitor the risk of occurrence of fraudulent activities through the development of an effective corporate governance framework. The corporate governance framework is necessary for developing standard guidelines for the employees regarding the use of computer technologies to prevent the fraud occurrence. Also, the employees should be provided proper training for detecting the fraudulent activities to minimize the risk of occurrence of such activities. The employee training is necessary to provide adequate awareness to the employees about the type of computer frauds and the strategies that could be implemented for resolving them. The financial team of an organization should possess adequate skills and capabilities to detect and prevent the occurrence of technology frauds in the accounting environment. This can occur through designing and implementing an accounting system based on internal control strategies that could help in early identification and prevention of frauds associated with use of computerized systems (Pedneault, Silverstone, Rudewicz & Sheetz, 2012).
Hall (2012) stated that the reliability and accuracy of the accounting system based on the information systems should be continually reviewed for minimizing the risk occurrence of computer frauds. The database systems used in accounting system should be continually checked for detection of computer frauds. The monitoring of the accounting information systems will help in ensuring that the information resulting from the use of such system is relevant, reliable, complete, understandable and verifiable. The monitoring also helps in assessing the impact of the internal and external environmental factors on the accounting information systems. The internal environment factors refer to examination of administrative and organizational structure that helps in developing an effective internal control within the workplace. In addition to it, the external environmental factors refers to impact of customers, suppliers, stock holders, employees, lenders and government on the accounting information system of an organization. The external environment of the accounting system impacts the decision-making and processing of accounting data. Thus, the complete understanding of the accounting information system is necessary to understand the importance and complexity associated with the use of computerized systems in the accounting environment (Hall, 2012).
The research methodology is an important part of research process for providing an overall direction to carry out the overall research process. It provides information related to various methods, techniques, approaches, design and tools applied in overall research work. So it can be said that research methodology has been considered as the blueprint of the research. In this research there has been study about the computer frauds that usually impacts the business environment. Research methodology helps to achieve the research objectives in very efficient and in effective manner. Information related to the research topic through using various techniques, procedures and research tools that helps the researcher to get the knowledge for the actions and sequence that are needed to be adopted in order to get the reliable results in best way possible. The present research has incorporated the use of qualitative research methodology for achieving a specific answer for the research problem (Basford and Slevin, 2003). The qualitative research methodology involves collecting qualitative data through the use of primary and secondary sources of information. The primary information will be collected through the use of questionnaire survey method.
Research approach provides the ways through which data collected can be interpreted and analyzed so the researcher can get the valid and reliable results. There are mainly two types of research approaches that are used in the research in order to achieve the aims and objectives of the research in best way possible. These research approaches are inductive and deductive research approach. Inductive research approach aims to use such techniques that help in achieving the generalized view on the research topic through gathering the specific information about the topic. Specific information can be gathered through performing the surveys and many other information gathering tools so that general view can be made (Basford and Slevin, 2003). On the other hand deductive approach aims to provide the specific information through studying the generalized information. Generalized information can be gathered through performing the literature review of the books, articles, and journals published on that particular topic by various researchers.
In this research study inductive approach has been applied as the aim of the research is to provide the general information about the computer fraud in various organizations in United Kingdom. So specific information from the few organizations in United Kingdom is gathered in detail and general view is made on the basis of that.
Research design is very important that helps in gathering the required information in very easy manner. In this research explorative research design is used as it focuses on gaining the insights and exploring the information related to research topic. There are mainly two types of research design; they are descriptive research design and exploratory research design (Maxwell 2012).
There are mainly two types of research work that are selected according to criteria of research being carried out. The research types are qualitative research and quantitative research. Qualitative research emphasize on the collection of the information in subjective and qualitative terms. This research type helps in collection of detailed information on the research topic that helps in achieving the required knowledge which solves the research questions successfully. In order to do this research properly qualitative research type has been used as in this research both literature review and data analysis has been carried using the qualitative tools (Creswell 2013).
Research methods are very important in overall research and it is backbone on how the complete research study is carried as data analysis is completely dependent upon the research method (Hinton, 2004). In this research, questionnaire has been used as the primary source of information and for secondary source of information books, journals and other published articles has been used. The sample size taken for this research is 15 respondents that are selected from 5 companies from United Kingdom. These 5 companies are Bestway Group, John Lewis Partnerships, Arcadia Group, Specsavers, and Gala Coral Group. Graphical method has been used to analysis the primary source of information and literature review has been used to analyze the secondary source of information. Researchers have gathered information by the use of survey through questionnaire method and literature review method (Gratton and Jones 2010). It might be possible that researchers find difficulty in collecting the information from the respondents as they are reluctant in providing the information to specific questions asked in the form of ideas, opinions, thoughts and information which are essential for obtaining accurate results for the research study.
Level of Awareness
As stated from the above graph, the level of computer frauds within the business environment is on increase. Out of the total 15 respondents, 13 participants have stated that there is a rising tendency of occurrence of frauds in the business context with the increasing use of technological devices. Thus, it can be said that level of awareness in the financial staff of business organizations about the computer frauds is on increase. The fact can be supported from the literature review section as per which the business organizations are associated with greater risks of computer frauds due to increasing use of technological devices. Thus, the employees are facing the issue of computer frauds that occurs with the use of technological devices and this is responsible for increasing level of awareness within the workplaces about these types of frauds (Beatty and Samuelson, 2015)
The results obtained from the analysis of the above graph provide an awareness regarding the level of awareness about the types of computer frauds in the accounting environment. Out of the total 15 respondents, 14 participants have acceptable knowledge about the different type of frauds that can occur within the business organizations from the use of computerized systems. Thus, it can be said that financial experts does not have steady knowledge about the risks associated with the use of computer technologies in accounting environment. The fact can be supported from the literature review section as per which the financial employees need to be provided adequate training for increasing their awareness about the computer frauds so that they can tackle them properly (Taylor, Fritsch & Liederbach, 2014).
It is depicted from the above graph that the use of internal control strategies for prevention of computer frauds within the accounting environment is on increase. Out of the total 15 respondents, 9 participants have reported an acceptable level of use of internal control strategies within their organizations for prevention of computer frauds. The remaining 6 participants have reported a good level of the use of internal control strategies within the workplace for detection and prevention of frauds. The fact can be supported from the literature review section as per which the business organizations are using internal control strategies for prevention of frauds. The development of internal audit committee helps in continually reviewing and monitoring the accounting systems within the business environment for identification of any type of computer frauds (Singleton et al., 2006).
It can be stated form the graphical illustration that out of 15 respondents, 11 have reported an acceptable level while 4 have reported a good level of responsibility undertaken by the accountants and the computer programmers for fraud prevention within their organization. The fact can be supported from the literature review section as per which the accountants should have in-depth knowledge about the risks associated with greater use of computerized systems in carrying out accounting process and procedures. The computer programmers are responsible for designing of accounting information systems and thus hold the responsibility of implementing such features in the information systems that minimizes the chances of fraud occurrence (Beatty and Samuelson, 2015).
As depicted in the above graph, the majority of the respondents strongly agree with the fact that computer fraud is becoming an issue of important concern within their organization. The fact can be supported from the literature review as per which the business organizations are increasingly adopting the use of computer technologies for carrying out their daily operational activities. The main reason behind the increasing use of computer technologies is carrying out the business operations with greater speed and accuracy. However, there is large risk involved with the use of the computer technologies in the business processes as the fraudulent activities can negatively impact its performance to a large extent (Singleton et al., 2006).
The above graph illustrates that majority of the respondents are in support of the fact that increasing use of computer technologies in the accounting operations is responsible for the rising number of frauds within the organization. The fact can be supported from the literature review section as per which the use of information systems in the accounting operations is causing the risk of breach of safety through leakage of financial information and mis-representation of financial information to the outside parties (Salem, 2012).
It can be illustrated from the above graph that majority of the respondents does not agree with the fact that there is presence of adequate techniques within their workplace for computer fraud management. Thus, it can be inferred from the above finding that business organizations are still not aware of the risks associated with the use of computer technologies in the accounting practices. As supported from the literature review, there is an increasing need for spreading awareness among the employees regarding the various types of frauds that can occur in the accounting environment with the use of computer technologies. This will help in early identification and prevention of computer frauds (Willis, 2017).
The above graph indicates that majority of the respondents are in support of the fact that business organization should provide adequate training to the employees for minimizing the occurrence of computer frauds. In this context, the literature review also states that employee training is necessary to develop the required skills and capabilities in them for reducing the risk of computer frauds (Singleton et al., 2006).
The above graph indicates that out of total 15 respondents, 8 participants agree and 7 disagree with the fact that management of business organizations should continually review the internal control systems for addressing the fraud issues in the accounting environment with the use of compute technologies. The literature review in this regard also stated that the role of internal control systems is very important for prevention of computer frauds (Salem, 2012).
It can be stated from the graphical analysis that majority of the respondents are in support of the fact that role of internal control techniques is very important for prevention of computer frauds. In this context, the literature review also stated that internal controls such as developing strong governance framework and establishing audit committee for reviewing of computer frauds is very necessary for fraud prevention (Willis, 2017)
As depicted in the above graph, the majority of the respondents are of the view that implementing ethical codes is necessary for prevention of fraud. In this context, the literature review states that establishment of strong corporate governance framework is necessary for prevention of fraud as it would provide standard ethical guidelines to all the employees for carrying out the business activities (Turner and Weickgenannt, 2016).
The above graph indicates that majority of the respondents are in support of the view that developing an internal audit committee is necessary for reviewing and monitoring the frequency of occurrence of computer frauds. As per the literature review, the internal audit committee developed within the business organization would help in assessing the risks associated with the use of computing technologies. The establishment of audit committee would help in examining the business processes and technologies and thus identifying the risks of computer frauds in advance (Willis, 2017).
As illustrated in the above graph, the majority of the respondents are not in support of the view that use of manual accounting practices in place of computing technologies in the accounting environment would help in reducing the frauds. As per the literature review, the manual accounting practices are not as advantageous in comparison to the use of computing technologies as they are not able to provide speedy and accurate results. Therefore, the business organizations should emphasize on the implementation of other prevention strategies to reduce the occurrence of fraud (Turner and Weickgenannt, 2016)
As stated in the above graph, the majority of the respondents are of the view that continuous benchmarking of accounting technology program is necessary for reducing the fraud occurrence. In this context, the literature review states that continuous monitoring of accounting information system would help in identification of the loopholes in the system and thus developing the strategies for their prevention (Sharma & Panigrahi, 2013).
The above graph indicates that majority of the respondents are in support of the view that management should adopt the use of electronic access for the employees before extracting the confidential information of a company. The fact can be supported from the literature review section as per which the breach of confidential information is the most prominent risk associated with the use of computer technologies in the accounting environment. Therefore, the use of electronic access would help in reducing the chances of leakage of confidential information to the outside parties as only limited employees would be able to extract the information (Cooper, Dacin & Palmer, 2017).
Conclusion
On the basis of the overall discussion held in the research study, it can be concluded that increasing use of computer technologies in the accounting practice is causing the risk of occurrence of fraudulent activities. The research study has largely contributed in developing an understanding of strategies that could be implemented by business organizations of the UK to prevent the occurrence of computer fraud in accounting environment. In addition to this, the research study has also helped in gaining an insight into the reason for the occurrence of frauds in the accounting environment. It can be inferred from the study that greater use of computer technologies in the accounting environment is responsible for the occurrence of frauds. It has also been implied from the research study application and implementation of effective internal control strategies for reducing the fraud occurrence.
It can be inferred from the research study that computer frauds that usually occur in the accounting environment are breach of safety through leakage of confidential financial information to the outside parties and manipulation of financial information by the accounting managers for their personal benefits. The major techniques that can be used by the businesses for prevention of computer frauds are implementing effective corporate governance framework that would establishing the ethical codes for employees to carry out their job responsibilities. The internal controlling systems of business organization using computer technologies in the accounting environment should be based on the ethical codes for prevention of fraud. Also, the business organizations should limit the use of computer technologies in the accounting processes for minimizing the frauds. The manual practices should be preferred for carrying out critical accounting processes in order to reduce the chances of leakage of confidential information to the outside parties.
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