World Com Analysis - 1472 Words

There were several situations that lead the executives and managers of WorldCom to cook the books. Acquisition of other companies drove WorldCom to spend beyond their means; managers were told to spend whatever was necessary to increase revenue, even if it meant that long-term costs would outweigh the short-term gains. This fiscally unhealthy mentality led to a very bad decision to enter into long-term fixed rate leases for network capacity with extensive punitive termination provisions. Once the market for WorldCom s services started to cool down, the expense to revenue ratio started to increase Ââ€" as expenditures increased and revenue decreased, the percentage value would rise above the targeted 42% to a larger, more unfavorable†¦show more content†¦Arthur Anderson is also at fault for not detecting problems earlier. By switching its traditional auditing practices to analytical reviews and risk assessments, the auditors relied on the information from General Accounting as being valid and did not question its numbers. The more traditional audit would have been cumbersome due to the size of WorldCom, but would have indeed brought the fraud to light. In retrospect, there are not many processes or systems that could have been put in place to prevent or detect quickly the types of actions that occurred in WorldCom. Increased transparency between offices could have perhaps made a difference. Better Ââ€" or perhaps independently run Ââ€" accounting practices could have led to avoidance of the fraud. If managers and employees did not directly receive orders from executive directors, there would be less pressure to commit the fraud and perhaps report the indiscretions to an outside party. External auditors should have followed better guidelines and raised the risk rating and subsequent procedures. A system of checks and balances should be put into place to make sure that external audits are unbiased and not influenced by the auditor s profit margins. Bot h the external auditors and board of directors were blameworthy in this case. As mentioned above, Arthur Anderson s auditing system did not have the ability to detect the fraud as they relied on the information beingShow MoreRelatedMkt 571 Week 1 Mkt 571 Week 11245 Words   |  5 PagesMKT 571 MKT571 Complete Course Click below link for Answer or visit www.workbank247.com http://workbank247.com/q/mkt-571-week-1-to-week-6-complete-course-mkt571-co/10439 http://workbank247.com/q/mkt-571-week-1-to-week-6-complete-course-mkt571-co/10439 MKT 571 Week 1 Marketing Environment Simulation and Summary Complete  the Marketing Environment Simulation and Summary in MyMarketingLab. Save  your results report from the simulation to your computer. 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