3. Why were the actions taken by WorldCom managers not detected eartier? What processes or systems should be in place to prevent or detect quickly the types of actions that occurred in WorldCom? One of reasons that actions taken by management were not detected earlier was due to the compa nys corporate culture. it was stated that each department had its own rules and management style, which was most likely due to the lack of written policies. WorldCom's CECI, Ebbers, referred to a code of conduct as a "waste of time.'I Ebber's attitude sets a negative tone at the to p, allowing lower level employees to also believe ethics is not an important issue. Employees were encouraged to do what they were told by their supervisors with no questio ns asked. This created an environment where employees did not feel comfortable enough to express concerns about WorldCom's management. There were bonus incentives that were awarded to those employees who were "loyal" in following management, which further prevented employees from speaking out. Also, many employees were unaware that the company even had an internal audit department and those who did knew that the department would be ineffective because they reported directly to the board of directors. Additionally, the fraud remained undetected as a result of the lack of authority by the audit committee and the board of directors. An employee once reported suspicious behavior to the audit committee but was reprimanded by Sullivan from communicating with the committee and told to stay away. There was also a co nict of interest because Ebbers presided over the boa rd meetings due to his honorary chairman's role. Both Sullivan and Ebbers were in charge of creating agendas and presentations, which were manipulated before given to the board and the audit committee. Perhaps one of the biggest reasons that management's actions went undetected was due to the lack of due diligence by Arthur Andersen. Because of An dersen's view of World Com being their I'crown jewel."I they failed to properly audit the company with pro per risk procedu res. Their risk management software program rated World Com as a "high risk" client with regard to fraud and concluded that it should be upgraded to "maximum risk". Despite this assessment, the audit team did not modify its audit approach and continued their audit of WorldCom as a "moderate-risk" client. Although Arthur Andersen didn't properly assess the risk of the co mpa nyI they were also misled by WorldCom as they were presented with altered and omitted information. There are many processes and systems that could have been put in place to detect or prevent these actions in a timely manner. There should have been a code of conduct that established an ethical and open corporate culture. Not only with a written policy but hiring ofcers in top management
