Lessons for Auditors and Regulators from the WorldCom Fraud Essay

Lessons for Auditors and Regulators from the WorldCom Fraud - Essay ExampleThe duplicity was undertaken by representing line costs as capital, rather than expenses and inflating revenue on the financial statements. However, a team of ingrained take stockors later on came to discover the dishonorable representation of financial statements and notified the Companys 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 hold of issues to put into consideration such as, the importance of fraud auditors to hold up knowledge and an generalizeing of corporate systems and processes. Lessons have it that r appearine internal audit processes may not expose fraud, since auditors focus on providing assurance with heed 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 protrude fraud. Fraud detection in corporate organisations relies on the knowledge and understanding of auditing and detection by prescribeds of the fraud background, fraud schemes, principles, and indicators (Singleton & Singleton, 2010, p.145). WorldCom internal auditors were well conversant with the organisations culture and choices of recording the financial statement, which helped them at present 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 claim line cost in the operating ex pense account as a fraud (Rezaee & Riley, 2010, p.212). However, in the raw loopholes in financial statements often require auditors to improve and devise new ways of detecting fraud, since aside indicators may not be applicable in future fraud cases. Corporate fraud has perpetually advanced with the computerisation of operations, and thus requires fraud auditors to be proactive in improving their fraud detection schemes. Corporations wishing to put in place mechanisms for assessing fraud as an organisations risk, and approach the risks using applicable internal audit methodologies. Fraud auditors should also be seen with regard to the presence of indicators of fraud, and design relevant controls and stripe methods of fraud. However, proactive fraud seeking auditing activities may be costly for organisations, though not comparable to period of loss in case of successful fraud. Cost involved may include knowledge expansion in the area of fraud detection and more so, the use o f electronic-detection tools. Internal auditors have the mandate to understand an organisations 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 absolute indicators of fraud and possible fraud in future of the organizations inconsistency with fraud risk levels that organizations face (Rezaee & Riley, 2010, p.213).