Operational Review for Worldcom

Accounting Fraud at WorldCom

Scope of Our Review

For the purpose of identifying areas for improvement, our review and analysis of present accounting systems included the following work steps or tasks:

1. Personnel Interviews. We met with the Accounting management and Accounting personnel to analyze present accounting systems and associated areas for improvement, as well as to determine future requirements. These discussions and reviews provided us with a working knowledge of:

• Present Accounting Systems Procedures

• Problem areas, more specifically the critical ones

• Coordination and related reporting and communication networks between departments

• Information requirements, present and future needs

2. Functional Activities. Review of the systems and procedures presently required to perform accounting systems related functions as:

• Accounting department organization structure and related functional job descriptions, including responsibility and authority relationships

• Accounting Department accounting systems, including the establishment of goals, objectives, approvals for line transfers, and risk analysis

• GAAP practices, monitoring and control around balance sheets and income statements

3. Accounting Systems. Observation and analysis of Accounting operations and reporting systems, including:

• Accounting Department organizational chart

• Accounting Systems and Procedures

• Financial Reporting

Objectives

The objectives of this operational review were to identify the work being performed by the Accounting Department personnel in order to formulate future operational requirements, as well as to make observations and recommendations as to the manner in which immediate and/or short term improvements could be realized. The principle focus of our efforts was toward developing operating procedures that would provide optimum efficiencies in meeting GAAP requirements.

Our Approach

Our approach to reviewing Accounting Department accounting systems involved an analysis of operations according to the existing organizations structure. With this, we divided our review into the Accounting Department functional activity areas as follows:

• Chief Financial Officer

• Finance Overview

1. Financial Reporting

2. Internal Audit

3. Controller

4. Financial Operations

• Planning and Decision making

• Channels of Communication

• Delegation of Authority

• Financial Reporting

1. Journal entries

2. Account reconciliation

3. List of Accounts from GL

4. Financial Statements

Reporting

At the conclusion of each of the stages of analysis, we have prepared a review of findings and recommendations that were submitted