Situations that could help prevent

Performing the duties of Board of directors in oversighting the organization

- board should ensure that the organization is keeping to its defined purpose
- to ensure the company's prosperity by collectively directing the company's affairs, while
meeting the appropriate interests of its shareholders and relevant stakeholders
Control objectives for the board includes to ensure the board sets the direction of the
organisation and to ensure the board effectively oversees management. The Board wasn’t
involve in the fraud, but they played far too small a role in the life, direction and culture of the
Company. They had little to no involvement in the business other than through attending board
meetings. Also, One of the findings from the investigation of SEC in the WorldCom is that the
“Management almost never consulted with Directors outside of Board meetings, and Ebbers
was unchallenged at the Board meetings”. Board served as passive observers in a Company
thoroughly controlled by Ebbers. It is easy for the management to mislead or deceive the
board when they have the complete control over the business. If the BOD had fulfilled its
responsibilities and not left the organization in the hands of the management, they would have
immediately seen and prevented such behavior of top management.

Setting up a Strategic Planning Committee

The Strategic Planning Committee will be responsible in developing a strategic plan which they
have to monitor, update and report to the Board about its progress. A competitive strategy
searches for a favorable competitive position in a company’s industry, aiming to establish a
position in which the company is profitable and sustainable against its competitors. The
management at WorldCom was so determined to grow that it not only failed to create a
competitive strategy, but also did not see that with growth comes “the need to maintain” to
prosper. In the end, that lack of strategy prevented it from effectively planning and determining
a position to acquire that prosperity.

Active Audit Committee Members

The audit committee’s negligence depicts another weakness in WorldCom’s internal controls.
First of all is to have a better composition of audit committee. Majority of the audit committee
members must be independent directors and have a knowledge and experience in accounting,
auditing and finance. It is very important to have members in the committee that fulfill their
duties by overseeing the corporation’s internal control structure as well as making sure that the
company complies with “laws, regulations, and standards.” The members should also
periodically meet with the firm’s internal and external auditors to ensure the audit process is
efficient and be aware of the company’s operations.

Ethical codes and policies are complete and applied

- to establish a direction for the company and pathway to meet the organization's ethical
responsibilities to its stakeholders
- Creating a code of ethics makes decision-making easier at all levels of an organization by
reducing ambiguity and considerations of individual perspectives in ethical standards.
The only mention of ethics in its Employee Handbook was contained in a two-page section that
simply stated that fraud and dishonesty would not be tolerated and advised employees to
report to their managers and/or the Human Resources department any unlawful or unethical
behavior. One of the Control Objectives for Internal Governance Processes is promoting
appropriate ethics and values within the organization. Ethical codes will guide the employees in
making right decisions, aligned to the values of the business and Provide guidelines that leaders
can follow when making decisions. Having these documents where the employees can refer to
may mitigate an employee’s rationalization of an unethical decision. (Travis Jones,2017)
Implementing a code of ethics and having employees read and sign it periodically can reinforce
ethical conduct as well emphasize that it is important to the company

Promote Positive Work Environment

Poor morale can affect employee attitudes about committing fraud while a culture that
empowers employees to participate in creating a positive work environment can build respect
for the company’s code of conduct. The employees at WorldCom did not have a proper outlet
to express concerns about company policy and behavior . Wrongdoing occurs less frequently
when employees have positive feelings about their workplace than when they feel abused,
threatened or ignored.
- Having an Open door policy and Employee Assistance Program could serve as the
employees’ outlet of concerns

Promote Tools for Effective Reporting of Suspicious or Inappropriate Activities

Some employees who discovered the fraud feared losing their jobs if they ever report it.
According to the 2018 association of certified fraud examiners Report to the Nation,
approximately 40% of all fraud was uncovered through tips. Worldcom should also have
policies that can encourage employees to report such cases.
 - Having a whistleblower hotline can boost employees’ confidence to speak up about
misconducts while remaining anonymous.

- An anti retaliation policy that can help ease employees’ minds from fear of losing their
jobs or discrimination at work
-
Expanded role for Internal Audit
The role of Internal Auditor in financial auditing is not to attest to the fairness of presentation
of financial statements but it should still focus on the evaluation of the internal controls over
financial reporting. When Internal Audit began looking at financial issues in late 2001 and early
2002, two of its first audits (Wireless bad debt reserves and capital expenditures) found serious
problems. If the internal audit also focused on the internal control over the accounting process
from the very beginning, they could have prevented or at least detected the fraud earlier.

Professional Skepticism of External Auditors

External auditors relied too much on the information given by management and the perceived
integrity ng top management. If Andersen exercised professional Skepticism, he could have
demanded more evidences rather than relying on management's information, which would
have helped him to develop a more appropriate auditing approach and make the right
judgment that WorldCom has a maximum level of risk of fraud being committed.