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Auditing and Assurance Services 1st Edition by Iris Stuart
Edition 1ISBN: 978-0073404004Auditing and Assurance Services 1st Edition by Iris Stuart
Edition 1ISBN: 978-0073404004 Exercise 18
WorldCom
The WorldCom fraud described in the text is one of the simplest frauds committed. Company executives simply took expenses and made them into assets. They did this with a simple adjusting entry: debit assets, credit expenses, and the expenses recorded on the income statement (lowering net income) became assets (having no effect on net income.) The chapter description of WorldCom posed several questions.
a. Did outsiders receive information that was relevant and reliable when they reviewed WorldCom's financial statements
b. Was the information free from bias
c. Did the capitalized assets recorded on WorldCom's books "faithfully represent what they claimed to represent" Were they really assets
d. Did shareholders have the information to make a good decision regarding WorldCom if they held its stock
e. Could lenders make a good decision regarding WorldCom loans Explain your answer.
The WorldCom fraud described in the text is one of the simplest frauds committed. Company executives simply took expenses and made them into assets. They did this with a simple adjusting entry: debit assets, credit expenses, and the expenses recorded on the income statement (lowering net income) became assets (having no effect on net income.) The chapter description of WorldCom posed several questions.
a. Did outsiders receive information that was relevant and reliable when they reviewed WorldCom's financial statements
b. Was the information free from bias
c. Did the capitalized assets recorded on WorldCom's books "faithfully represent what they claimed to represent" Were they really assets
d. Did shareholders have the information to make a good decision regarding WorldCom if they held its stock
e. Could lenders make a good decision regarding WorldCom loans Explain your answer.
Explanation
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Audit:
The audit is the process of chec...
Auditing and Assurance Services 1st Edition by Iris Stuart
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