WorldCom Notes Essay

“Although it was not the internal audit department’s duty, Cooper decided that she and several others in her division would investigate the company’s financials on their own, performing what essentially would be a series of mini audits. She did not mention that task to any of the higher-ups at WorldCom; instead, she and her staff worked long hours, often through the night, as they pored over the books.” (Mead) On one side of things, people could see that Cynthia Cooper acted on two code of ethics principles that internal auditors are expected to apply and to uphold. One being her integrity, which states that “internal auditors establishes

Two-way communication facilitates effective staff member compliance. Employees must feel that supervisors and managers will receive concerns with neutrality. To support this environment, compliance personnel implement formal procedures for voicing concerns. The procedure allows employees to anonymously report issues if desired. While larger enterprises may provide a toll-free hotline for this purpose, smaller firms might implement an open door policy.

This week I learned that when someone comes in looking for assistance you call the hotline specialist, or the outreach case manager and they will send someone down as soon as they can. If the person looking for assistance does not want to wait I should give them a card with the crisis hotline number on it.

Review “Just pucker and blow: An analysis of corporate whistleblowers” in Chapter 2. Please respond to the following:

-Whistleblowing: Whistleblowing is a way in which you can make other members of staff/managers aware of any poor practice, concerns or illegality. It’s important that anyone concerned about issues surrounding safeguarding should be able to report them in a confidential way which has no repercussions towards the individual who reported it. All members of staff should feel that they are able to raise concerns without any fear of discrimination or victimisation.

1. There are numerous differences between performing a review and actual audit on the financial statements, but the major one is that the review does not contemplate obtaining an understanding of internal control structure. Also, a review does not assess control risk, tests of accounting records and responses to inquiries by obtaining corroborating evidence through inspection, observation or any other audit procedure. It can point out significant matters of the financial statements but does not provide assurance of their accuracy. The issue with ZZZZ Best case is that the auditors review was not sufficient enough to review any misstatements on the financial statements. Ernst & Whinney never questioned the internal control, reviewed

(S): Writer met with the consumer on Tuesday, 1/9/18 at 1:40pm at his home. The consumer report that the stress test went good. The consumer states that his heart rate was low and he was told to continue to take his medication. The consumer states that he is working on ways to handle stress. The writer discuss with the consumer about some coping skills which should help him to deal with the stress. The consumer is schedule for medication review appointment on Wednesday, 1/10/18 at 10:00am. The consumer denied any sleep and appetite problems.

Due to these criminal activities, many top executives were convicted fraud and sentenced to spend time in prison. WorldCom activities did not align with the company's overall mission and goals. The actions taken by management were not in the best interest of the customer instead they were consumed with acquisitions and increasing the value of WorldCom Shares. The management also should have considered general accounting practices during their strategic planning. Furthermore, create procedures that protect all stakeholders within the firm.

Preventative measures could have been instituted to avoid the WorldCom corporate fraud. First, WorldCom should have had an external Board of Governors comprised of businessmen

The audit committee’s responsibility was to look over the accounting and financial reporting process as well as the financial statement audits; appoint, compensate and oversee the external auditor; and to ensure that the company has a whistleblower program. (p. 52) At first glance the committee could notice that something was not right with the company’s financial records. But nothing was done and nothing was said.

From careless and fake accounting, auditors found two significant new details of data that only aided to the fraud at WorldCom. One, WorldCom

P., & Coulter, M. K., 2012, p. 152), although it seems none of WorldCom’s executive management team seemed to feel this way. Many steps could have been taken to prevent the collapse of the WorldCom empire, but only a few key managers held the power and none were willing to take action. One control that did not exist in WorldCom’s culture was allowing both internal and external auditors access to all necessary documents and statements. Without full disclosure of these items no one could see how many risks the company was taking by making fraudulent entries against their books. Also the external audit team, Arthur Anderson, held WorldCom as one of its best customers which was a major conflict of interest. This relationship lead to many fundamental mistakes from Anderson not keeping pressure on WorldCom and getting all vital information that would prove how poorly the company was being run. Had they been operating transparently, auditors and employees would have seen the accounting deception and could potentially have stopped it prior to the company’s collapse. In addition, by employing multiple auditing firms many of the mistakes being made may have been caught and discontinued from the beginning.

WorldCom acquired Arthur Andersen as the independent external auditing for the company. As WorldCom grew after the merger with MCI, Andersen began to invoice less than they should have. The charges were defended as an opportunity to prolong business with WorldCom. (Kaplan and Kiron, 2007). This is an immediate red flag for a company. Where were the ethical practices of the independent auditor? If the auditor has no ethics, how can one possibly be assured that the company is performing its intended function appropriately? The board of directors should have immediately been informed of Andersen’s practices and made a decision to confront Andersen’s practices and possibly obtain new independent auditors.

To help individuals report, it is suggested the management should start a whistle blowing hotline. Such a hotline can be a critical component of the company’s anti corruption efforts as tips can be a common way of detecting frauds.

There were several people responsible for the WorldCom scandal, as well as, whistleblowers that first discovered the accounting fraud. The former CEO, Bernard Ebbers was found to be the main offender of the fraud. He did it by capitalizing inflated revenues with phony accounting entries and he was eventually sentenced to 25-years for fraud, conspiracy and filing false documents with regulators. Scott Sullivan, the former CFO, pleaded guilty to one count of conspiracy to commit securities fraud and was sentenced to 5-years after testifying against Bernard Ebbers. The former Director of General Accounting, David Myers, pleaded guilty to