A social psychology perspective of fraudulent reporting at WorldCom: Pressures, incentives and involvement of the CEO and CFO

History gives testimony that fraudulent financial reporting is a recurring phenomenon. As the circumstances from firm to firm differ, case studies are useful to examine what contributes to fraudulent financial reporting in individual firms. For this reason, this research is undertaken as a case study to examine the salient factors of fraudulent financial reporting at WorldCom that collapsed in 2002. The study finds that the CEO and CFO of WorldCom participated in producing fraudulent financial reports under diverse individual, institutional and exogenous circumstances. As they were influential in materially misstating financial reports and espoused attitudes and arguments supporting their actions, this study uses a social-psychology framework called “fraud triangle” to explain the pressures, incentives, interactions, influences and behaviours of the company’s CEO and CFO. The study suggests that future researchers undertake case studies and use this theory for examining the interactive factors of fraud.