Accounting Fraud at Worldcom 2 Essay

1418 Words Sep 12th, 2011 6 Pages
CRAM Exclusive
Essay Sample
Accounting Fraud at WorldCom Vanessa Gail Woods Strayer University Connor-Green/ACC 576 March 21, 2010 Accounting Fraud at WorldCom The break up of AT&T opened the long distance service market to small companies during the mid- to late-1980s and 1990s. Long Distance Discount Service (LDDS) opened in 1983 with moderate growth until its stock went public in 1989. CEO Bernie Ebbers decided to grow the organization through acquisitions (70 companies over the course of its

middle of document…

Pros and cons of “whistle blowing”
The investigation of WorldCom found that the second largest fraud in history at that time continued as long as it did because no one in the financial or accounting department had the courage to blow the whistle. There are pros and cons of “whistle blowing” that should be taken into consideration when one is making the determination to expose fraud at any level.
For a person to be a whistle blower they must have integrity and a desire to minimize the wrongs in a culture where management cuts corners to improve the bottom line. All facts must be known and consideration of the consequences must be taken into account. The informant must take the proper steps in notifying those within the organization or their immediate supervisor first to lay a trail that can shed light on the extent of the corporate governance breakdown. One must recognize that there is no safety zone in making this choice, but a clear conscience can be a great motivator to step outside the realms of the corporation and enlist the help of the external auditors or the SEC. The pros of being the whistleblower is that those who have invested in the organization, both internal and external stakeholders, will have their investments protected and faith in the market is retained.
The flip side to being a whistle blower is the hassles and retaliation from those whose
CRAM Exclusive

Related Documents

  • Essay on Worldcom Accounting Scandal

    We know that reserves created for one expense cannot be used to offset another expense, as this is in violation of accounting principles. The rationale given for making this entry was that DiCicco would eventually find $150 million in savings from disputed billings to WorldCom. It is clear that this is in clear violation of GAAP. 3. In the White Paper presented to the Board of Directors, the CEO Scott Sullivan supported the decision to capitalize line costs. The rationale provided was that this

    Words: 1241 - Pages: 5
  • Worldcom Creative Accounting Essay example

    directors engage in 'insider dealing' in their company's shares they can use creative accounting to delay the release of information for the market, thereby enhancing their opportunity to benefit from inside knowledge. Scope of creative accounting 1) Flexibility in regulation. Generally the regulation, particularly the accounting regulation permits flexibility in choosing a policy to follow; the International Accounting Standards let the financial management to choose between valuation of the non-current

    Words: 4608 - Pages: 19
  • Accounting Fraud at World Com Essay

    result of the analysis. Not appearing is natural because Worldcom change it in the level of 42% ROE every year as the above-mentioned. The achievement of the other organization of a like nature thoroughly traced the downward curve at the same time. Such judgment is too poor. Third point is a problem of posture in the end to the company. WorldCom was "Crown Jewel" for Andersen. Because it was status with the huge gorilla like WorldCom in the client in a word. To want to actually maintain a long-term

    Words: 1020 - Pages: 5
  • Accounting Fraud at Satyam Computers Essay

    This was used to drive up its stock price and Raju’s family members would dump their shares into the market, thereby making huge profits. ROLE OF ACCOUNTING FIRM Following the letter from the Satyam chairman, who accepted that he had misrepresented facts in the company’s balance sheet, role of auditors and accountants for the company came under scanner. The falsification of accounts by Satyam for the past several years has put a question mark on the credibility of its auditor, PricewaterhouseCoopers

    Words: 947 - Pages: 4
  • Accounting Equation 2 Essay

    has instructed Ron Rivera, the head of the Accounting department for Smith Company, to report the company’s land in the company’s accounting Reports at its market value of $170,000 instead of its cost of $100,000. Smith says, “Showing the land at $170,000 will make our company look like a better investment when we try to attract new investors next month.” The Ethical situation of this scenario is that according to the Generally Accepted Accounting Principles {GAAP}, the cost principle of a company

    Words: 611 - Pages: 3
  • Worldcom Essay

    WorldCom is a major global communications provider, operating in more than 65 countries. WorldCom provides data transmission and Internet services for businesses, and, through its MCI unit, provides telecommunications services for businesses and consumers. WorldCom became an important player in the telecommunications industry in the 1990s. However, as the economy cooled in 2001, WorldCom’s earnings and profits similarly declined, making it difficult to keep WorldCom’s earnings in line with expectations

    Words: 1605 - Pages: 7
  • Worldcom Solutions Essay

    that if WorldCom would have done this with their employees, when Scott Sullivan wanted the numbers to be changed, someone would have reported him instead of just doing what he asked them to do. Then there is the area of the independent external auditor for WorldCom, Arthur Andersen. Andersen’s risk management software program had given WorldCom a rating of “high risk” for committing fraud and because of the telecommunications industry; the auditors upgraded them to “maximum risk”. WorldCom withheld

    Words: 704 - Pages: 3
  • Worldcom Essay

    "(a)t the peak of the audit, in late 2003, WorldCom had about 1,500 people working on the restatement, under the combined management of Blakely and five controllers…(the t) otal cost to complete it: a mind-blowing $365 million"(McCafferty, 2004). In addition to revealing sloppy and fraudulent bookkeeping, the post-bankruptcy audit found two important new pieces of information that only served to increase the amount of fraud at WorldCom. First, "WorldCom had overvalued several acquisitions by a total

    Words: 1988 - Pages: 8
  • Financial Accounting Chapter 2 Assignment Essay

    _______ _______ ________ 2. Accounts receivable. _______ _______ ________ 3. Service revenue. _______ _______ ________ 4. Smith, Capital. _______ _______ ________ 5. Smith, Drawing. _______ _______ ________ Class Exercise – 2 Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transaction. 1. Kevin Diaz invested £50,000 cash to start an appliance repair business. 2. Hired an employee to be paid

    Words: 1291 - Pages: 6
  • Essay on Assignment 2 – Acg11 Accounting for Business

    transaction or other event giving rise to the entity's control over the future economic benefits must have occurred.” (AASB 1995 Sac 4 paragraphs 15) (Wikipedia 2012)”The International Accounting Standards Board (IASB) uses the following definition: "Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants

    Words: 3134 - Pages: 13