ETHICAL ISSUES RELATED TO ADMINISTRATIVE PROCESSES AND REPORTING (STUDY OBJECTIVE 7)

imagesAs in any business process, unethical or fraudulent behavior can occur in administrative processing and the reporting functions of an organization. However, in the process described in this chapter, unethical and fraudulent behaviors are much more likely to be initiated by management, not employees. Employee fraud is more prevalent in the routine processes of sales, purchases, payroll, and other processes described in previous chapters, while management fraud is more prevalent in administrative processes and reporting. There are several reasons that unethical and fraudulent behavior would tend to be management- rather than employee-initiated.

First, in a properly controlled system of administrative and reporting functions, employees do not have access to related assets or source documents. A review of the previous chapters reveals processes where employees have daily access to assets, source documents, and records. In processes related to sales, purchasing, and payroll, employees have access to assets such as inventory and cash. In addition, employees have access to source documents or records that can be fraudulently used. As examples, employees can inflate hours in their time card, steal cash or checks if they work in the mail room, steal inventory if they work in the warehouse, or process fictitious ...

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