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The Internal Environment And Types Of Fraud In The Environment

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Fraud in the environment
The accounting fraud that happened at WorldCom is a type of fraud that can take place at any company or organization. With accounting fraud, many people that are affected include the organization, employees, and investors. Different frauds can occur, such as system fraud, friendship fraud, and overpayment fraud.
Accounting fraud is when someone purposely tries to manipulate and change the financial statements of a company or organization. “A company can falsify its financial statements by overstating its revenue or assets, not recording expenses and under-recording liabilities.” (Nickolas, n.d.) WorldCom purposely overstated its assets to be able to dip into them to increase profits so it would meet profit projections.
System fraud is the type of fraud that the management or the perpetrator will take advantage of the weak controls of the company. For example, at WorldCom, the control environment was very weak, and this made it much easier for the perpetrators to defraud the company. WorldCom’s internal environment was a mess waiting to happen. Even without the fraud, the company would have collapsed, yet perhaps sooner than it did. The fraud was similar to a piece of gum patching a hole in a dam. The external environment was the storm that caused the gum to unravel. Lastly, the lack of proper personnel to detect and fix the hole was the auditing failure. The internal problems at WorldCom were its lack of a competitive strategy, weak internal

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