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You are working at your desk. Suddenly four people burst into your office. Two are armed U.S. marshals, and two claim to be from an organization called the Software Publishers Association (SPA). One of the marshals informs you that the SPA has a warrant to conduct a surprise audit of the software loaded in all of your company's computers. If any unauthorized software is found, your company could be fined up to $250,000. Worse, as a management accountant with internal control responsibilities, you could be found guilty of a felony and sentenced to five years in a federal prison, even if you had no knowledge of any illegal activity. Couldn't happen to you? Don't bet on it! In 1994 alone, the SPA took action against 447 organizations and received more than $2.5 million in fines.
No company is too small to be noticed by the SPA. Most of the companies under investigation have between 20 and 50 computers.l Perhaps more important, don't think that you can escape prosecution if an employee copies software without your knowledge. You and your company can be held liable even if both are totally unaware of the illegal actions of your employees!2
Management accountants have a major responsibility to ensure that their company establishes and enforces policies and procedures that protect both it and its managers from the penalties associated with violating software piracy laws. A survey we conducted of Chamber of Commerce members in central Pennsylvania found that only 30% had a written software policy.
What is the law?
Computer programs are protected by copyright law, which prohibits unauthorized duplication. The purchaser of a computer program does not own that program; he or she merely has the right to use the software.3 The software licensing agreement disclosed in the software documentation indicates the specific terms of use. It usually includes a warning that opening the package (or accessing the program) signifies acceptance of the terms and conditions of the license. A typical license permits the purchaser to install the program on one computer and to make only one backup copy to be used if the original is damaged.
A 1992 amendment to the Federal...