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For This Assignment Research The Internet Or Strayer Databases To Loc

For this assignment, research the Internet or Strayer databases to locate a firm that was involved in a fraud and/or embezzlement case. Explain how the firm’s accounting information system (i.e., components and functions) contributed to the fraud and/or embezzlement. You will need to focus on how each component/function of the accounting information system failed, which resulted in the scandal/case. Write a ten to twelve (10-12) page paper in which you: Based on the information you researched, assess the failure of the firm’s accounting information system to prevent the related fraud/embezzlement.

Imagine that the company you researched uses a third-party accounting system. Evaluate the effectiveness of the firm’s stakeholder in the event that a third-party accounting system suffers a breach. Include an assessment of the level of responsibility of the software provider to the business and its clients. Support your rationale with relevant evidence. Determine what advances in accounting and/or information technology could have prevented the event from occurring and provide support for your argument.

Evaluate what changes should be made to both the Sarbanes-Oxley Act of 2002 and other current laws to make them more effective in deterring companies from committing crimes. Recommend a strategy that the company you studied may use to prevent future business information failures. Indicate how the company should approach implementing your recommended strategy and support your rationale. Use at least three (3) quality resources in this assignment.

Paper For Above instruction

The case of fraud and embezzlement within the corporate world reveals significant vulnerabilities in the design and implementation of accounting information systems (AIS). The failure of such systems can create avenues for malicious activities, including financial fraud and unauthorized embezzlement, jeopardizing stakeholder trust, regulatory compliance, and corporate sustainability. This paper examines the accounting system failure in the Enron scandal, evaluates the potential influence of third-party systems and breaches, suggests technological advancements for prevention, and discusses legal reforms aimed at fortifying corporate accountability and internal controls.

Introduction

In the complex landscape of corporate governance, the integrity of accounting information systems plays a critical role in ensuring transparency and compliance. The Enron scandal, one of the most infamous cases of corporate fraud, underscores how weaknesses in accounting systems, coupled with systemic failures in internal controls, enabled executives to manipulate financial statements and misappropriate assets. This analysis will explore the specific components and functions of Enron’s accounting system, the points of failure leading to fraudulent activities, and the role of third-party providers in potential breaches.

Failure of the Accounting Information System in Enron

Enron’s use of complex financial instruments and off-balance-sheet entities was facilitated by an accounting information system that inadequately detected irregularities. Critical components such as data input controls, processing procedures, and reporting mechanisms failed to flag anomalies. The firm's management employed sophisticated accounting techniques, including mark-to-market accounting, that relied heavily on subjective judgments, thereby increasing the risk of manipulation.

The functions of the AIS—recording, processing, and reporting financial data—were compromised by intentional overrides and lack of proper segregation of duties. The system’s inability to prevent or detect fictitious transactions and inflated asset valuations points to a failure in internal controls and system integrity. Additionally, the external auditors failed to critically evaluate the existing controls, further enabling the fraud.

Impact of Third-Party Accounting Systems and Breaches

Enron’s reliance on external auditors and third-party consultants added layers of complexity and risk. If a third-party accounting system suffers a breach, stakeholders could face significant losses and erosion of trust. The responsibility of software providers becomes prominent, as their duty extends to ensuring the security, integrity, and confidentiality of financial data. In a breach scenario, the software provider’s liability depends on their adherence to industry standards and contractual obligations. Protecting client data requires implementing advanced cybersecurity measures, regular audits, and compliance with regulatory standards such as SOC reports and ISO certifications.

Advances in Technology to Prevent Future Incidents

Emerging technological requirements, such as blockchain, artificial intelligence (AI), and continuous audit tools, offer promising solutions for preventing fraud. Blockchain technology, with its decentralized and immutable ledger, can significantly reduce tampering risks. AI-driven anomaly detection systems can monitor transactions in real-time, flagging irregularities much faster than traditional audit methods. Additionally, integrating automated controls within accounting software enhances oversight and reduces manual override capabilities.

Legal Framework and Revisions to Deterrence Strategies

The Sarbanes-Oxley Act (SOX) of 2002 introduced essential internal control provisions but requires strengthening to address evolving risks. Reforms should include mandatory cybersecurity requirements, regular third-party audits, and stricter penalties for non-compliance. Updating laws to include provisions for data breach notifications and digital forensic investigations would raise accountability standards. Comprehensive legislation must also promote transparency in third-party service provider relationships, ensuring that legal responsibilities are clear when breaches occur.

Strategies for Preventing Future Business Failures

The company should adopt a holistic approach that combines technological advancements, rigorous internal controls, and ethical corporate culture. Implementing blockchain-based ledgers can provide tamper-proof records. Regular employee training on fraud detection, coupled with strong whistleblower policies, encourages early reporting of suspicious activities. External audits should focus not only on financials but also on cybersecurity protocols. The company must establish a continuous monitoring system aligned with international standards like COSO frameworks and NIST cybersecurity guidelines.

Implementation Approach

Effective implementation involves phased deployment, staff training, and ongoing review. Initial steps include assessing current systems, selecting appropriate technologies such as blockchain and AI, and updating policies to reflect new controls. Engaging external consultants with expertise in cybersecurity and financial fraud prevention ensures objectivity. Leadership commitment is essential for fostering a culture of integrity. Regular audits, feedback loops, and incident response plans will sustain the improvements over time.

Conclusion

The Enron case highlights the critical need for robust accounting information systems fortified with advanced technologies and legal frameworks. By integrating innovative solutions like blockchain and AI, strengthening legal accountability, and fostering a culture of transparency, organizations can substantially mitigate the risk of fraud and embezzlement. Continuous adaptation to technological and regulatory advancements is vital for safeguarding stakeholder interests and maintaining public trust.

References

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• Fitzgerald, J., & Moon, R. (2018). Blockchain technology and its implications for accounting. Journal of Emerging Technologies in Accounting, 15(1), 1-14.
• Hammersley, J. S., & Thurston, D. (2008). Ethical issues in accounting: A review. Journal of Business Ethics, 79(3), 341-357.
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• O’Reilly, R. (2019). Sarbanes-Oxley Act: Effectiveness and future directions. International Journal of Law and Management, 61(4), 620-635.
• PwC. (2021). Cybersecurity and data privacy in financial services. PwC Reports. https://www.pwc.com
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• Yoon, S., & Lee, J. (2017). Technology-driven internal controls and fraud prevention. Journal of Information Systems, 31(2), 37-55.