Page 420 - Introduction to Business

394 PART 4 Accounting

A key reason for having ethical guidelines is not to provide a cookbook solution to
every practice-related problem, but to aid in the decision-making process for situa-
tions that involve ethical questions. Businesspeople will encounter novel situations
in their jobs and will need ethical guidelines to handle them effectively. Ethics codes
are necessary to provide such guidance. To aid its 100,000 members in resolving
ethical dilemmas, the Institute of Management Accountants recently established an
ethics hotline. Ethics counselors offer confidential advice, solace, and comfort to
management accountants who may have no other place to turn for help.

reality How would you describe your values? Have you ever been confronted
CH ECK with an ethical dilemma in the workplace?

Computer Crime

LEARNING OBJECTIVE 5
List a few examples of computer crime.

Lack of ethics naturally manifests itself in undesirable behavior. The latest technol-
computer crime The use of computers ogy is often used to commit crimes. Computer crime involves the use of comput-
to perpetrate or facilitate illegal activity ers to perpetrate or facilitate illegal activity. The average computer crime has been
estimated to cost $600,000, while the average white-collar crime is estimated to cost
only $23,500. The average armed robbery is estimated to cost even less, only $250.
To make matters worse, statistics show that the higher the dollar amount of a crime,
the lower its probability of prosecution.
The increased use of the computer to maintain financial records has led to more
opportunities for computer crime. Estimates of computer fraud losses are several
billion dollars per year. One of the most highly publicized crimes was the Equity
Funding fraud, in which nonexistent insurance policy records were added to the
customer master file of the firm. Allegedly, this was done by carrying out “unsched-
uled” file updating that was not part of the normal data-processing operations.
A second well-known computer crime concerned Pacific Telephone. The perpe-
trator was able to manipulate the system by taking advantage of the following sys-
tem shortcomings:

Account numbers and passwords that were shown on printouts were not
adequately controlled.
Equipment was allowed to be shipped to locations not normally used by the
firm.
Computerized purchasing procedures were available to personnel who had
no need to know the procedures.
The online computer system of the state of Colorado was used to make unau-
thorized modifications to the driving records of persons convicted of violations.
The modifications were made to enhance the insurability of the persons involved.
The online computer system of the University of Southern California (USC) was
used to make unauthorized changes to course grades. At both places, the state of
Colorado and USC, unauthorized modifications were made by authorized opera-
tors, not by the persons whose records were changed.
The rail firm Penn Central Railroad once discovered that nearly 400 railcars had
been “misplaced.” The computer system had been modified in such a way that
missing railcars would go unnoticed.
reality Do you know anyone who has been a victim of computer crime? Has
CH ECK your computer ever been infected by a computer virus?

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