ACC 564 Accounting Information Systems

Name: ACC 564 Accounting Information Systems
Brand: Strayer University
Price: 2 USD
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Author: Zoey Taylor

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

Zoey Taylor

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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

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

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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Strayer University

Subject

Accounting

ACC 564 Accounting Information Systems

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