WorldCom case study

WorldCom case study

Answer 3.

No, I do not believe that World com had established an efficient control system because there were fraudulent methods of accounting were used in order to mask its decline in earning by covering its false picture of financial growth. This was done in two ways. World com had established an underreporting of line costs which is interconnected expenses with other companies of telecommunication and also by capitalizing the cost of the balance sheet instead of the appropriate materials or items that were expensing. There also inflated revenues along with the bogus accounting entries from the “corporate unallocated revenue accounts. It is because according to accounting standard section 319 the internal control is the process in which there is an effective and efficiency in the operation along with there is the reliability in the financial reporting (Lymer, 2003).

Answer 4.

The control environment sets the attitude and the quality of an organization in which the control consciousness of people is affected. It is basically the foundation of all the components for the internal control process that structure and provides the discipline. Following are the factors of the control environment.

There, factors includes: a. Ethical values and honesty b. Assurance to competence c. The participation of the audit committee or the board of directors d. Operating style and the philosophy of management e. Structure of organization f. Practices and policies of human resources g. Assignment of responsibility and authority Control environment was necessary because the growth was unrealistic when there were low expectations. At that time, aggressive philosophy of management was required. The people were badly pressurized because of not getting support for the aggressive target. Therefore, the atmosphere and the culture was encouraged by aggressive target that had led them to unethical, illegal, and dishonest activities. The permission was ...