Page 423 - Introduction to Business

CHAPTER 11 Accounting for Decision Making 397

• Reducing human error caused by fatigue or carelessness
• Processing transactions in a consistent fashion
• No dishonest or disloyal motivations on the part of the computer
On the other hand, computer systems have certain disadvantages. These include
• Lack of judgment
• Some users’ assumption that computers are always correct
• Less segregation of duties and functions
• The audit trail being more difficult to follow because it is hidden or fragmented
• Greater potential for tampering with data to cause unauthorized actions
• Easier access to information concentrated in computerized files
• Easier loss of information electronically (A few keystrokes can erase whole files.)
Auditors must be aware of these advantages and disadvantages when planning
the examination of a computerized accounting system.
If all employees were totally competent and ethical, then internal controls
would be virtually unnecessary. However, no matter how effective the hiring func-
tion of the personnel system, some employees will be less than ideal. Furthermore,
even well-intentioned employees will occasionally make mistakes due to fatigue or
carelessness.

Foreign Corrupt Practices Act
The U.S. Congress passed the Foreign Corrupt Practices Act (FCPA) in 1977. The law
prohibits any U.S. firm, including any officer, director, or employee, from using “the
mails or any means or instrumentality of interstate commerce corruptly in further-
ance of an offer, payment, promise to pay, or authorization of the payment of any
money, or offer, gift, promise to give, or authorization of the giving of anything of
value to”
A foreign official
A foreign political party
An official of a foreign political party
A candidate for foreign political office
Any person who will in turn give the money (etc.) to one of the aforesaid
individuals or entities for purposes of influencing a decision or act in
order to assist in obtaining or retaining business or directing business to
a person.

Penalties for conviction of such acts include fines or imprisonment.
The FCPA amended the Securities Exchange Act of 1934 by requiring public
companies to devise and maintain a system of internal accounting control suffi-
cient to provide reasonable assurance that
• Transactions are executed in accordance with management’s general or spe-
cific authorization.
• Transactions are recorded as necessary (I) to permit preparation of financial
statements in conformity with generally accepted accounting principles or any
other criteria applicable to such statements, and (II) to maintain accountabil-
ity for assets.
• Access to assets is permitted only in accordance with management’s general or
specific authorization.
• The recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.

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