Question

Pick a public company (worldcom) that has recently (in the past 3-4 years) been featured prominently in the news as having experienced fraud and/or gross negligence (reporting or accounting). Then in an essay of 250-300 words, discuss how a good system of internal control may have prevented the problem and or detected it sooner. Describe what could have been done differently and by whom.

Answer 1

“Good System of Internal Control” in detecting and preventing and detecting the fraud instances within the WorldCom Company”

The "COSO (Committee of Sponsoring Organizations of the Treadway Commission)" as a form of internal control framework for the diagnosing of the fraud case structure has been perceived following the “mid-1990s”, as the No. 1 inward control structure for such organization like “WorldCom” which is for-benefit or philanthropic association in any geological zone or culture. The committee manages the proper auditing and control mechanism to check the fraud initiation or any other loop hole in the business reporting and accounts administration.

The control system is unequivocally suggested by universal standard-setting legislative, private, and expert associations around the world.Furthermore, COSO can be utilized not just for the setup and improvement of an inner control framework additionally for the examination and comprehension of control framework disappointments in authentic extortion cases.(A.Kennedy, 2012)

These are some effective things used to detect and prevent such fraud applying the COSO in the WorldCom company fraud situations in misleading accounting and mistakenly approved statements related to the bankruptcy scandals which happened in the recent years.(Stefano, 2005)

These are the components of the internal control of the company which played the specific role in fraud prevention as a part of the management.To discover the major flaws at WorldCom, wepartitioned the “internal control system” by relating the four COSO control modules and charting them by scheming the weaknesses alongside the corresponding fraud experiences.

1. Control Environment
2. Control activities
3. Risk Assessment
4. Monitoring

The COSO regulatorconstituents are the fundamental criteria for measuring the potential success of any internal regulator system and its susceptibility to fraud. But they too can yield a backward aspect at a fraud situation to investigate how it occurred. And by means of the lessons knowledgeable, we can run-through them to circumvent and/or detect unpredicted, potential mismanagement, wrongdoing or even scam in the upcoming time.A compelling informant project is critical to the accomplishment of misrepresentation discovery. On the off chance that an informant program does not exist, one should be executed. The system must clarify how representatives should report their suspicions.(Westhausen, 2010)

Works Cited

A.Kennedy, K. (2012). An Analysis of Fraud : Frauds, prevention and notable cases. Retrieved from scholars.unh.edu: http://scholars.unh.edu/cgi/viewcontent.cgi?article=1099&context=honors

Stefano, T. F. (2005). WorldCom's Failure: Why Did It Happen? Retrieved from www.ecommercetimes.com: http://www.ecommercetimes.com/story/45542.html

Westhausen, H.-U. (2010). The WorldCom Fraud Under A COSO Magnifier. Retrieved from www.fraud-magazine.com: http://www.fraud-magazine.com/article.aspx?id=2147483732