Analyzing The Fraudulent Activities Of Worldcom

3290 Words14 Pages
This study indicates the importance of audit’s fraudulent activities according to a failed company. In this paper an attempt is made to analyze the fraudulent activities reasons and fraud performance of WorldCom. Also analysis the accounting and audit environment in WorldCom. WorldCom was the second largest long distance telecommunications corporation in America. Although the corporate structure was consistent with “best governance practice” and some governance indicators were even higher than the industry average requirements, the WorldCom’s failure proves that their corporate governance was just in format and not in action, especially in audit respective. The CEO, management and board members did not fulfill their
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WorldCom group operation and MCI group operation played key roles in its business activities. WorldCom group operation included data services, internet-related services, commercial voice services and international communications. MCI group operation owed a series of retail and wholesale communications services. However, accounting fraud caused WorldCom went bankrupt in 2002 year. (Pandey, S. C, & Verma, P., 2004). WorldCom admitted there was $ 3.85 billion fraud profit in their financial statement.
WorldCom’s bankruptcy has a massive negative effect on North America market. It was getting through a long time to discover their big fraud scandals. So the reason to their bankruptcy is complicate. After the collected and researched many resources, I analysis some main reasons focus on audit activities. Next I will analysis the issues from two perspectives.
Inside of the WorldCom

Accounting function
The independence is significant role not only in audit activities, but also is essential tool for the director to manage whole company. However, in WorldCom, audit committee lost their independent at the started. Firstly, the audit committee has close connection with outsider auditor - Arthur Andersen. Secondly, some board members charge the position in the audit committee. But some members were not outside of directors. They discussed the audit process with outside auditors and as well
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