COMPUTER FRAUD IS DEFINED AS ANY DECEPTION OR EMBEZZLEMENT ACCOMPLISHED BY TAMPERING WITH COMPUTER PROGRAMS, DATA FILES, OPERATIONS, EQUIPMENT, OR MEDIA WHICH RESULT IN FINANCIAL LOSSES TO THE ORGANIZATION WHOSE COMPUTER SYSTEM HAS BEEN MANIPULATED. ALSO INCLUDED ARE THEFTS OF COMPUTER INFORMATION, USE OF COMPUTER TIME FOR PERSONAL GAIN, ALTERATION OF COMPUTER RECORDS TO DISTORT FINANCIAL REPORTS, AND SCHEMES IN WHICH GOVERNMENT, BUSINESS, OR THE PUBLIC IS THE VICTIM. BECAUSE COMPUTERS COMPRESS OLDFASHIONED BOOKKEEPING PROCESSES INTO A SINGLE PRODUCT, THEY PERMIT FRAUD IN WAYS NOT POSSIBLE BEFORE. EQUITY FUNDING'S CREATION OF OVER $100 MILLION IN FICTITIOUS ASSETS IS A PRIME EXAMPLE OF COMPUTERIZED FRAUD. CASES OF COMPUTER FRAUD IN GOVERNMENT HAVE INCLUDED STEALING SUPPLIES, MAKING FRAUDULENT PAYMENTS, PROCESSING FRAUDULENT CLAIMS, MISUSING COMPUTER TIME, AND STEALING INFORMATION. A RECENT SURVEY OF 150 MAJOR COMPUTER FRAUD CASES SHOWED THAT MANIPULATION OF TRANSACTIONS IS THE MOST FREQUENT METHOD OF FRAUD AND THAT MUCH COLLUSION IS INVOLVED. TO PREVENT SUCH FRAUD, A TIGHT SYSTEM OF INTERNAL CONTROL IS NEEDED. SPECIAL ATTENTION SHOULD BE GIVEN TO (1) SEPARATION OF RESPONSIBILITIES, (2) WRITTEN PROCEDURES, (3) TRAINING, (4) COMMUNICATION, (5) TRANSACTION CONTROLS, (6) CONTINUOUS AUDITS, (7) IMPROVED RESPONSIBLE REPORTING, (8) PROGRAM CONTROLS, (9) FILE CONTROLS, (10) ORGANIZATION OF COMPUTER CENTERS, AND (11) PHYSICAL SECURITY. TO MAINTAIN CONTINUED COMPUTER SYSTEM INTEGRITY, IT IS MOST IMPORTANT TO SEPARATE THE SYSTEM PLANNING AND PROGRAMMING FUNCTION, THE MACHINE OPERATING FUNCTION, AND THE PROGRAM MAINTENANCE AND TAPE LIBRARY FUNCTION. SUCH A SEPARATION OF FUNCTIONS IN ADDITION TO PROPER PERSONNEL TRAINING AND SUPERVISION WILL NOT ONLY MINIMIZE THE CHANCES FOR FRAUD BUT WILL ALSO INSURE THAT FRAUD IS EASILY DETECTED IF IT DOES OCCUR. TABLES AND FOOTNOTES ARE INCLUDED. (CFW)