Reporter Dan Evans, who has pleaded guilty to conspiracy to hack phones, said "even the office cat" knew the illegal practice was widely used at the now defunct paper.
Coulson, a former media chief to Prime Minister David Cameron, stared out from the dock as Evans told the jury at London's Old Bailey court: "The truth is that Andy Coulson knew exactly what was going on on his watch."
Murdoch closed the News of the World in 2011 over a storm of revelations that its staff had illegally accessed the voicemail messages of a murdered schoolgirl, as well as hundreds of celebrities.
Coulson, 46, and his predecessor as editor Rebekah Brooks are on trial alongside several other former employees of Murdoch's British newspaper wing. They all deny charges linked to phone-hacking.
Evans told the court on Monday that he was recruited to the News of the World in 2004 from the rival Sunday Mirror because of his hacking skills -- and Coulson knew this when he hired him.
Coulson had described the tape of the conversation as "brilliant", Evans claimed yesterday.
But interrogated over this claim by Coulson's lawyer today, Evans admitted he may have been "paraphrasing" when he said Coulson had said the tape was "brilliant".
Coulson edited the News of the World from 2003 until 2007, when he became Cameron's communications chief.
He was forced to quit in 2011 over claims that he knew more about hacking at the News of the World than he had previously admitted.
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