AIS

• Ethics


  The principles of conduct that individuals use in making choices and guiding their behavior in situations that involve the concepts of right and wrong
• Objective of this section

  • To heighten the reader's awareness of ethical concerns relating to business, information systems, and computer technology
• Business Ethics


  Ethical standards are derived from societal mores and deep-rooted personal beliefs about issues of right and wrong that are not universally agreed upon
• Why should we be concerned about ethics in the business world?

  Conflicts may arise between employees, management, and stakeholders. Ethics are needed when these conflicts arise to choose what is right
• Four Main Areas of Business Ethics

  • Not provided
• Computer Ethics


  The analysis of the nature and social impact of computer technology and the corresponding formulation and justification of policies for the ethical use of such technology
• Three levels of computer ethics

  • Pop
  • Para
  • Theoretical
• Pop computer ethics


  Simply the exposure to stories and reports found in the popular media regarding the good or bad ramifications of computer technology
• Para computer ethics


  Involves taking a real interest in computer ethics cases and acquiring some level of skill and knowledge in the field
• Theoretical computer ethics


  Of interest to multidisciplinary researchers who apply the theories of philosophy, sociology, and psychology to computer science with the goal of bringing some new understanding to the field
• Main Computer Ethics issues

  • Privacy
  • Security—accuracy and confidentiality
  • Ownership of property
  • Equity in access
  • Environmental issues
  • Artificial intelligence
  • Unemployment and displacement
  • Misuse of computer
• Privacy


  People desire to be in full control of what and how much information about themselves is available to others, and to whom it is available
• Security (Accuracy and Confidentiality)

  Computer security is an attempt to avoid such undesirable events as a loss of confidentiality or data integrity. Security systems attempt to prevent fraud and other misuse of computer systems; they act to protect and further the legitimate interests of the system's constituencies
• Which is most important: security, accuracy, or confidentiality?
• Ownership of Property


  Laws initially created to protect real property rights have been extended to include intellectual property, such as software. This raises questions about what can be owned in this context: ideas, media, source code, or object code. Another issue is whether owners and users should have limitations on their use or access
• Equity in Access


  Some barriers to accessing information systems are inherent in the technology, while others can be addressed through thoughtful system design. Factors like economic status and cultural considerations can limit access to computing technology
• Environmental Issues


  High-speed printers make printing documents faster and easier than ever before. However, this convenience can lead to overprinting and unnecessary use of paper, which comes from trees and contributes to landfill waste if not recycled properly
• Artificial Intelligence


  The popularity of expert systems has raised new social and ethical issues. Marketed as decision-making tools or replacements for experts, people often heavily rely on them. This raises concerns for both knowledge engineers (who write the programs) and domain experts (who provide task knowledge) regarding faulty decisions, incomplete or inaccurate knowledge bases, and the role of computers in decision-making
• Unemployment and Displacement


  Many jobs have been and are being changed as a result of the availability of computer technology. People unable or unprepared to change are displaced. Should employers be responsible for retraining workers who are displaced as a result of the computerization of their functions?
• Misuse of Computers


  Computers can be misused in various ways, such as copying proprietary software, using a company's computer for personal gain, and accessing others' files without permission
• Sarbanes-Oxley Act and Ethical Issues
• Section 406 - Code of Ethics for Senior


  Section 406 of SOX mandates that public companies disclose if they have a code of ethics for their CEO, CFO, and similar roles to the SEC. If not, they must explain why. Companies can disclose their ethics code in their annual report, on their website, or by providing it upon request
• Conflicts of Interest


  The company's ethics code should address handling conflicts of interest between personal and professional relationships, not just prohibiting them. While avoidance is ideal, some conflicts are unavoidable. Therefore, how conflicts are managed and disclosed is crucial
• Full and Fair Disclosures


  The provision requires organizations to provide clear, honest, and timely disclosures in documents submitted to the SEC and the public. This aims to prevent the use of complex and misleading accounting techniques seen in past scandals, ensuring future disclosures are candid and truthful
• Legal Compliance


  Codes of ethics should require employees to follow applicable governmental laws, rules, and regulations. As stated previously, we must not confuse ethical issues with legal issues. Nevertheless, doing the right thing requires sensitivity to laws, rules, regulations, and societal expectations
• Internal Reporting of Code Violations

  The code of ethics must provide a mechanism to permit prompt internal reporting of ethics violations. This provision is similar in nature to Sections 301 and 806, which were designed to encourage and protect whistleblowers
• Accountability


  An effective ethics program must take action when violations occur, including disciplinary measures like dismissal. To ensure credibility, employees must trust the hotline. Section 301 requires audit committees to establish procedures for receiving and addressing complaints about accounting procedures and internal control violations, and they will oversee ethics enforcement
• Fraud


  In the business context, fraud refers to intentional actions aimed at deceiving a company, such as misappropriating its assets or manipulating financial data for personal gain. It's considered a form of white-collar crime and is often referred to in accounting literature as defalcation, embezzlement, or irregularities
• Legal Definition of Fraud

  False representation, material fact, intent to deceive, justifiable reliance, and injury or loss
• Auditors encounter fraud at two levels


  • Employee Fraud
  • Management Fraud
• Employee Fraud


  Committed by non-management personnel. Three steps: stealing something of value, converting the asset to a usable form, and concealing the crime to avoid detection
• Management Fraud


  Perpetrated at levels of management above the one to which internal control structure relates. Frequently involves using financial statements to create an illusion that an entity is more healthy and prosperous than it actually is. Involves misappropriation of assets, it frequently is shrouded in a maze of complex business transactions
• Fraud


  Intentional actions aimed at deceiving a company, such as misappropriating its assets or manipulating financial data for personal gain
• Legal definition of fraud

  • False representation - false statement or disclosure
  • Material fact - a fact must be substantial in inducing someone to act
  • Intent to deceive must exist
  • The misrepresentation must have resulted in justifiable reliance upon information, which caused someone to act
  • The misrepresentation must have caused injury or loss
• Levels of fraud encountered by auditors

  • Employee fraud
  • Management fraud
• Employee fraud


  • Committed by non-management personnel
  • Involves stealing something of value (an asset), converting the asset to a usable form (cash), and concealing the crime to avoid detection
• Management fraud


  • Perpetrated at levels of management above the one to which internal control structure relates
  • Frequently involves using financial statements to create an illusion that an entity is more healthy and prosperous than it actually is
  • Involves misappropriation of assets, it frequently is shrouded in a maze of complex business transactions
• 2004 ACFE study found loss due to fraud equal to 6% of revenues—approximately $660 billion
• 2004 ACFE study found higher losses due to men, employees acting in collusion, and employees with advance degrees
• Fraud schemes according to the Association of Certified Fraud Examiners

  • Fraudulent statements
  • Corruption
  • Asset misappropriation