Fraud in the AIS Essay Example | Topics and Well Written Essays - 2500 words

Fraud in the AIS - Essay Example The risks and threats are clearly seen in the case of WorldCom (Beltran, 2002). WorldCom was a telecommunication company founded in the year 1983. The company became so successful to the point where its stock price went up the peak, making the CEO, Bernard Ebbers, one of the richest men in the United States. The company continued with its expansion strategies by acquiring more companies. It was seen as one of the success stories in the business world in the 1990s (Fernando, 2009). In the year 2002, the company announced that it had used an improper accounting method that resulted to an overstatement in earnings in 2001and during the first quarter of the year 2002 by more than $3.8 billion. As a result, in 2002 the company filed for Chapter 11 bankruptcy, which was the largest filing in the history of the United States. It has $41 billion debt load and $107 billion in assets, making the bankruptcy even larger than that of Enron Corporation. The company had to lay off about a fifth of its employees in an effort to stay in business. Investigations showed that the accounting maneuver was exposed by the internal auditor in WorldCom. One of the main discoveries was on the company’s revenue expenditure that had been treated as capital expenditure. It resulted to an overstatement of the profits by $3.8 billion. As a result, the company’s external auditors, Arthur Andersen LLP released a statement stating that it acted according to the professional standards and that the internal audit could not be relied on in relations to the accounting manipulations. Arthur Anderson had acted in collusion with top management at WorldCom to falsify the company’s profits with the aim of increasing its stocks. The company’s audit committee, in turn, replaced Arthur Andersen LLP with KPMG to further investigate the matter.