StudentShare solutions
Triangle menu

Describe and Consider Lessons for Auditors and Regulators from the WorldCom Fraud - Essay Example

Extract of sample
Describe and Consider Lessons for Auditors and Regulators from the WorldCom Fraud

The fraud was undertaken by representing line costs as capital, rather than expenses and inflating revenue on the financial statements. However, a team of internal auditors later on came to discover the fraudulent representation of financial statements and notified the Company’s board of directors and audit committee, who acted swiftly although the company had already become bankrupt (Albrecht, Albrecht, Albrecht & Zimbelman, 2011, 457). Lessons from WorldCom Fraud Lessons learnt from WorldCom fraud presents a broad range of issues to put into consideration such as, the importance of fraud auditors to have knowledge and an understanding of corporate systems and processes. Lessons have it that routine internal audit processes may not expose fraud, since auditors focus on providing assurance with respect to effective controls, rather than detecting irregularities as `possibilities of fraud. Fraud auditors should actively seek to identify irregularities and anomalies as indicators of fraudulent behaviors among financial executives and general corporate staff, and use the knowledge to undertake further in-depth analysis to root out fraud. Fraud detection in corporate organisations relies on the knowledge and understanding of auditing and detection by officials of the fraud background, fraud schemes, principles, and indicators (Singleton & Singleton, 2010, p.145). WorldCom internal auditors were well conversant with the organisation’s culture and choices of recording the financial statement, which helped them immediately to recognise the $2 billion operating cost recorded as a fixed asset. This came out as a red flag unlike the normal culture of the organisation, more so when an official referred to the expenditure as prepaid capacity. Auditors’ understanding of the normal organisations culture was able to detect the omission of lease line cost in the operating expense account as a fraud (Rezaee & Riley, 2010, p.212). However, new loopholes in financial statements often require auditors to improve and devise new ways of detecting fraud, since past indicators may not be applicable in future fraud cases. Corporate fraud has continuously advanced with the computerisation of operations, and thus requires fraud auditors to be proactive in improving their fraud detection schemes. Corporations need to put in place mechanisms for assessing fraud as an organisation’s risk, and approach the risks using relevant internal audit methodologies. Fraud auditors should also be keen with regard to the presence of indicators of fraud, and design relevant controls and prevention methods of fraud. However, proactive fraud seeking auditing activities may be costly for organisations, though not comparable to extent of loss in case of successful fraud. Cost involved may include knowledge expansion in the area of fraud detection and more so, the use of electronic-detection tools. Internal auditors have the mandate to understand an organisation’s corporate culture, conditions, and choices that may have been used by fraudsters in engaging in financial statement fraud. Such an understanding would go a long way in providing accurate indicators of fraud and possible fraud in future of the organisations in consistency with fraud risk levels that organizations face (Rezaee & Riley, 2010, p.213). Fraudulent individuals may include brokers-dealers, financial advisors, and private investors who seek to mislead clients ...Show more
Cite this document
  • APA
  • MLA
(“Describe and Consider Lessons for Auditors and Regulators from the Essay”, n.d.)
Retrieved from
(Describe and Consider Lessons for Auditors and Regulators from the Essay)
“Describe and Consider Lessons for Auditors and Regulators from the Essay”, n.d.
  • Cited: 0 times


Auditing Naveed Butt 16 March 2012 Describe and Consider Lessons for Auditors and Regulators from the WorldCom Fraud Introduction WorldCom was the second largest listed long-distance phone company, which acquired other telecommunication corporations such as the MCI communications and thus grew aggressively…
Author : bahringerabe
Download 2
Describe and Consider Lessons for Auditors and Regulators from the WorldCom Fraud
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Describe and Consider Lessons for Auditors and Regulators from the WorldCom Fraud"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

The lessons for auditors and regulators from Enron fraud
The case study reveals that greed and unethical business practices were the root causes of Enron scandal. The Enron case scenario also points that the element ‘trust’ plays a significant role in determining the market position of a business. In addition, the Enron collapse also reminds auditors to be more vigilant while issuing an unqualified audit report.
12 pages (3000 words) Essay
WORLDCOM ACCOUNTING FRAUD. WorldCom is a telecommunication giant in the US telecommunication industry. Faced with the slowdown in the telecommunication industry, WorldCom began to realize a decline in their stocks. This placed the company management under pressure to improve their financial performance in the highly competitive industry.
9 pages (2250 words) Essay
Article review: Accounting Fraud at worldcom
The telecommunication boom in the 1990s lured the company managers to shift its strategy from maintaining market share to becoming a prominent stock. The unexpected recession and dot-com collapse spoiled the expectations of the company as the industry as a whole plunged into great loss.
4 pages (1000 words) Essay
Factors involved in fraud cases with external Auditors
It is utilised by investors for the decision making associated with the buying or selling of securities. The auditors provide guidance to the owners as well as investors for assisting them in their decision making procedure. The appropriate use of financial statements needs proper understanding of the responsibilities of auditors.
5 pages (1250 words) Essay
FIanacial Statement Fraud Worldcom Case
history. Presenting significant clues and insights on the nature and implications of financial accounting frauds perpetrated by corporations, the case of WorldCom is particularly instructive from a forensic accounting perspective. The case study presents an analysis and discussion on the accounting frauds committed by WorldCom that led to its eventual bankruptcy and the criminal prosecution of key corporate executives.
30 pages (7500 words) Essay
Participating in accounting fraud is a key component WorldCom, a multimillion dollar companies collapse
This exerted more pressure on executives of WorldCom to engage in fraudulent and unethical activities. The total accounting fraud reported by WorldCom amounted to $ 11 billion. WorldCom accounting
3 pages (750 words) Essay
Fraud Detection The role of Internal, External and forensic Auditors
cts for the purpose of illegitimate monetary gains is different from distortion of information without causing monetary losses, which can not be termed as fraud. The practice is usually costly for people and organizations once it occurs. It is therefore important to ensure that
5 pages (1250 words) Essay
Critically consider: (a) The role played by derivatives in credit default and implications raised by derivatives users if derivatives are misused; and (b) what lessons should be taken by the UKs financial sector and regulators in relation to 'Be
In addition to this, derivatives offer sophisticated management of risk. They allow for gearing or what is known as leverage. This is known as the ability of derivatives to soar 100 percent within a few days, when the security has risen to by a
3 pages (750 words) Essay
lanation of how the company grew from scratch until its collapse it is evident that the blame of the bankruptcy cannot be shouldered by the CEO (Bernie Ebbers who resigned in April 2002) and CFO (Scott Sullivan who was sacked in June 2002) only. Several others are also to blame
2 pages (500 words) Essay
Delphi Corp. fraud describe
The commission has charged the corporation and nine officials who were part of the plan to commit a fraud. According to the commission, Delphi organized a
2 pages (500 words) Essay
Comments (0)
Click to create a comment
Let us find you another Essay on topic Describe and Consider Lessons for Auditors and Regulators from the WorldCom Fraud for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us