The WorldCom fraud described in the chapter involved a simple earnings manipulation through which the company capitalized expenses to increase net income. This transaction was recorded by a journal entry to debit capital assets and credit expenses.
a. Describe the substantive audit procedures that an auditor could use to deter-mine whether financial statements are misstated by capitalizing expenses.
b. Identify analytical procedures that could have helped the auditor identify the risk of fraud at WorldCom.