Essay on World Com Case

1066 Words Oct 5th, 2012 5 Pages
WorldCom: internal audit lessons to be learnt
On June 9 2003, the U.S. Bankruptcy Court of New York issued a report on the WorldCom accounting fraud that expands on the court's earlier findings of mismanagement, lack of corporate governance, and concern regarding the integrity of the company's accounting and financial reporting functions.

Supervised by former U.S. Attorney General Richard Thornburgh, the study was commissioned by the court to investigate allegations including fraud, mismanagement, and irregularities within the company. One section of the more than 200-page report, "Accounting and Related Internal Controls," details WorldCom's weaknesses in internal and external audit processes. It also expands on the failings within
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Lack of substantive interaction with After 1997, internal auditing had little interaction with the external auditors company's external auditors, other than at quarterly audit committee meetings where both gave presentations. The external auditors did not receive internal audit reports and did not rely on internal audit work in their audits. Even though internal auditing identified internal control weaknesses in its final reports, there was no coordination with the external auditors to ensure that those weaknesses were not material, because the external auditor would report no material weaknesses in its own audits. No one confirmed whether or not the internal and external auditors were communicating about such issues and analysing the materiality of the weaknesses identified by internal auditing.

Deficiencies were noted in the annual The risk assessment used during the internal audit planning internal audit planning process process did not involve quantitative factors to measure risk with respect to internal control weaknesses or prior audit findings. The level of risk was determined by assessing whether or not the audit would add value, i.e., enhance revenue or detect significant cost savings. If an audit area's level of risk did not meet these criteria, the audit would be considered low risk and would not be performed.

Deficiencies were noted in the Thornburgh was concerned by the influence of management internal audit process

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