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Computer hackers
. 
The possibility of unknown persons trying to hack into the systems increases 
the potential for fraud against which the firm must protect itself.
(b) 
Lack of training within the management team
. 
Many people have an inherent lack of 
understanding of how computer systems work. Senior management can often be the least 
computer literate. They may also be the most reluctant to receive training, preferring to delegate 
tasks to assistants. Without management realising it, junior staff can secure access to vast 
amounts of financial information and find ways to alter it. 
(c) 
Identifying the risks
. 
Most firms do not have the resources to keep up to date with the pace of 
development in computer technology. This makes it ever more difficult to check that all major 
loopholes in controls are closed, even if management are computer literate.
(d) 
Need for ease of access and flexible systems
. 
In most cases, a firm uses computers in order to 
simplify and speed up operations. To meet these objectives, there is frequently a need for ease of 
access and flexible systems. However, implementing strict controls can sometimes suppress 
these features. 
 
3
Implications of fraud for the organisation 
While it is clear that fraud is bad for business, the precise ways in which the firm is affected depends on 
the type of fraud
 
being carried on.
3.1 Removal of funds or assets from a business 
Immediate financial implications 
Profits are lower than they should be. The business has less cash or fewer assets, and therefore the net 
asset position is weakened. Returns to shareholders are likely to fall as a result. 
Long-term effects on company performance 
The reduction in working capital makes it more difficult for the company to operate effectively. In the 
most serious cases, fraud can ultimately result in the collapse of an otherwise successful business, such 
as Barings. 
3.2 Intentional misrepresentation of the financial position of the business 
Financial statements do not give a true and fair view of the financial situation of the business. Results 
may be either artificially enhanced or, less frequently, underreported.
It is also possible that managers in charge of a particular 
division
can artificially enhance their division's 
results, thereby deceiving senior management. 
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