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Describe and Consider Lessons for Auditors and Regulators from the WorldCom Fraud - Essay Example
Author : bahringerabe
Finance & Accounting
Pages 12 (3012 words)
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…
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. ...