...WorldCom where being talked by lamplight and bundling as Enron is a lot of in topic of accounting fraud. However, the volume of information that can be obtained in Japanese is far less compared with Enron. The fact relevance makes the description of the case a base. WorldCom is a huge telecommunication company that exists in the United States before. The company that Mr. Bernard Ebbers founded in 1983 accomplishes the rapid growth repeating M&A with tremendous force. Long-distance telecom carrier and MCI in the fourth place in the U.S. at that time are purchased in 1996. At that time, this was the maximum M&A play in the history of all Americans. The stop of the United States Department of Justice hangs from the fear of the Antimonopoly Law collision though having seen shadow at height of the power of WorldCom schemes the purchase of Sprint of a major carrier for 1999 years. Time is done similarly, and it cracks to the recession ripple the telecom industry in the United States. The expansionary course is corrected through necessity, and the strategy of WorldCom starts straying. There was a business objective "ROE42% defending to the last" (so high!) in WorldCom. However, the maintenance becomes difficult, and comes to begin the fraudulent accounting procedure gradually as for the fold of the recession. Worldcom's scheme of a/c fraud is very simple, 1) counted as assets for rental fee of networking but it should be cost 2) padded up about earnings using Accrual Account...
Words: 1021 - Pages: 5
...Dot-Com Bubble Table of Contents Abstract ................................................................................................................................................... 3 Introduction ............................................................................................................................................. 4 Causes ..................................................................................................................................................... 4 Effects ..................................................................................................................................................... 5 Lessons learnt.......................................................................................................................................... 7 Conclusion .............................................................................................................................................. 7 Appendix ................................................................................................................................................. 8 Reference List ......................................................................................................................................... 9 Abstract This report presents an analysis of a stock market bubble, well known as “dot-com bubble”, which developed roughly during a period from 1995 to 2000, and ended up in 2001. The report discusses...
Words: 1542 - Pages: 7
...1. What are the pressures that lead executives and managers to “cook the books”? There were many pressures that lead managers at World Com to “cook the books”. They all stemmed for the need to reach their goal to be the No. 1 stock on Wall Street, even while the company wasn’t doing very well. Being No. 1 on Wall Street meant they focused on revenue growth which would increase their company’s market value. World Com started facing struggles as, “Industry conditions began to deteriorate in 2000 due to heightened competition, overcapacity, and reduced demand for telecommunications services]”. This forced World Com to reduce prices in order to match their compeititors affecting the E/R ratio. Ebbers pressured senior staff to improve its performance or they would lose everything. The CFO, Sullivan, formulated a plan to use accounting entries to achieve targeted performance and persuaded and coaxed many others to go along with the plan in order to stay on top. 2. What is the boundary between earnings smoothing or earning management and fraudulent reporting? The boundary between earnings management and fraudulent reporting can overlap at times. Earning management is defined as the use of accounting techniques to produce financial reports that may paint an overly positive picture of a company's business activities and financial position. Earnings management takes advantage of how accounting rules can be applied and are legitimately flexible when companies can incur expenses...
Words: 863 - Pages: 4
...U.S based telecommunication company. The WorldCom accounting scandal was disclosed in 2002. The Company had resorted to fraudulent accounting practices for five quarters (four quarters of 2001 and the first quarter of 2002) (The WorldCom Accounting Scandal, 2002). The well-known telecommunication company WorldCom and the accounting, auditing and consultancy enterprise were involved in this big accounting fraud. The corporate scandal of WorldCom ultimately headed the company towards the disgrace that ensued in the biggest bankruptcy in American history. After this act company terminated the service of the top executive including Scott Sullivan (Sullivan), the Chief Financial Officer and David Myers, the Senior Vice President and Controller. The main entity accused of this fraud in the company was the Arthur Anderson WorldCom auditor. The company auditors did the fraud and held Sullivan responsible for this fraud. Sullivan was arrested on charges of frauds and misrepresentation of the accounts. The Arthur main accused of fraud was washing their hand by fired the fact of fraud. He was creating the facts, which shows that he was not aware about the accounting discrepancies (The WorldCom Accounting Scandal, 2002). The auditor made the hole of $4 billion in balance sheet of the company, which created the financial crisis for WorldCom. For overcoming from the financial crunch company lay off 17000 workers, which was the 20% workforce of company. When the conduct fell through,...
Words: 1095 - Pages: 5
...In, 1985 two gas pipeline decided to merge to form The Enron Corporation. Enron was once the seventh largest publicly-held corporation in the nation. The purpose of this case study is to first research how the corporate leaders at Enron, who are so smart, managed to display such poor judgment. Secondly, answer the question: What do you see as the contributing factors to the demise of corporate giants like Enron, World Com, TYCO, Arthur Andersen, and others? This case study will identify at least three, and explain how their poor judgment contributed to their demise. Also in this case study I will address the questions: What might possibly happen when a corporation is placed in an oversight role of a business partner? One example of this was Arthur Andersen serving as Enron's auditor. How might a corporation ensure that this does not happen? What risks are involved if an individual decides to blow the whistle on unethical behavior within their company or institution? Are they really protected by law? The corporate leaders at Enron although smart managed to make poor decisions first by falsely reporting net income and cash flow. “Enron claimed a net income of $979 million in that year, it earned $42 million” (Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2015). Enron could also be defined as a cooperation with an arrogant culture, which “Enron executives believed competitors had no chance against it” (Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2015). Enron had a belief that...
Words: 686 - Pages: 3
...Technology Enron, World Com, & Tyco Scandals Three of the biggest frauds in American history, were committed by the companies Enron, World Com and Tyco. All three CEO/CFO’ks of these companies’ indulged in malicious intend to create a better financial standing within the company and for themselves. All of them were ethically wrong, regardless of the details. These individuals violated many different ethical principles which lead them all to be charged with criminal offenses and jail time. Enron used an accounting method known as “mark to market.” With this practice, the price or value of a security was recorded on a daily basis to calculate the profits and losses. Using this method allowed Enron to count projected earnings from long-term energy contracts as current income. This was money that might not be collected for many years. It is a thought that this was used to inflate revenue numbers by manipulating projections for future revenue. Sherron Watkins, an Eron VP, wrote an anonymous letter suggesting that the CEO had left the company because of improprieties and other illegal actions. She questioned the accounting methods and specifically citied certain transactions. Once Enron’s stock began to fall below a certain point, the results started to show on the financial statements. Finally in November of 2001 Enron officials admitted to overstating company earnings and filed for bankruptcy. This resulted in jail time and 78 counts of fraud for Andrew Fastow, CFO...
Words: 947 - Pages: 4
...Founded in 1999 by Jacky Ma in Hangzhou at eastern China, Alibaba.com has three major marketplaces. The company’s English language international marketplace Alibaba international (www.alibaba.com) serves to bring together importers and exporters from more than 240 countries and regions. The China marketplace Alibaba China (www.1688.com) is developed for domestic business-to-business trade in China. And Taobao (which means “digging treasure”) is China's most popular business-to-consumer and consumer-to-consumer trading site with more than 20 million registered users. In addition, Alibaba.com offers a transaction-based wholesale platform, AliExpress (www.aliexpress.com), which allows smaller buyers to buy small quantities of goods at wholesale prices. And Alibaba.com has achieved award after award in recognition of its achievement and impact on e-commerce, including “Best of the Web” by Forbes Magazine for seven consecutive years, the most popular B2B website by Far Eastern Economic Review, and other awards, including China Excellent Business Website and China Best Commerce Website. Alibaba.com is frequently quoted as one of the top five websites in the world along with Yahoo, Amazon, eBay and AOL, by domestic and international media. Business model of Alibaba.com It is to help sellers meet buyers. More specifically, it provides an Internet based business-to-business (B2B) platform where sellers (suppliers/manufactures) can meet buyers (outsourcers /wholesalers) on a global scale...
Words: 2034 - Pages: 9
...This paper is an overall assessment of the financial fraud that occurred at Worldcom. This paper will show that if an operational audit had been conducted how it could have uncovered the fraud at an earlier time. | Initial Survey and Engagement Development In the introduction survey there are several topics that should have been discussed in the initial survey and engagement development for an audit of Worldcom. When reading the Worldcom case the very first thing that I noticed was there was no written Delegation of Authority (dag). No one really had the ability to say no and there was no approval process for any type money or asset and liability transfers. When the accrual transfers took place, there were people that knew it was bad accounting but they did not have the ability to say no, and if they did, there job was threatened. This in general seems to me to put this company at a very high risk for fraud. Once this dag is established there is a line of signatures that must be obtained in order for anything in regards changes in the accounts to take place must have the correct signature according to the amount of money that is being adjusted. Another question in the initial survey would be a request for information (ROI) in regards to the accounting structure and the accounts that are involved in the area that is going to be audited. Also a ROI for all accrual accounts and back up information for payments. Asset accounts and deposit information will also need to be reviewed...
Words: 2593 - Pages: 11
...service for more than 150 different countries and it has over 630, 000 employees over the world. Even though AIG is such a giant corporation, it has encountered financial problems in the early 2000s. Under financial pressure and a lack of internal control, AIG have committed frauds resulting in several scandals. One of the accounting scandals was disclosed during 2005 which involved a material mis-statement due to false transactions during 2000. This scandal set to prelude leading the downfall of AIG in 2008. In this paper, I will analyze the cause, the transactions and finally effects of the scandal. The Accounting Scandal The Players The CEO of AIG was Maurice “Hank” Greenberg. Greenberg joined AIG in 1962 and led AIG for thirty eight years until his retirement in March 2005. Greenberg was not only the CEO, but also the chairman of the board of AIG. AIG also have several subsidiaries, which include National Union Fire Insurance Company of Pittsburgh (NUFIC) and Hartford Steam Boiler Inspection (HSB). Their financial information are consolidated in AIG’s financial statements. The scandal also involves another corporation General Re Corporation. General Re is a subsidiary of Berkshire Hathaway, Inc., an investment group run by the billionaire Warren Buffet. General Re also has subsidiaries all over the world and together and it is one of the biggest reinsurance companies in the World. Reinsurance companies are entities that insure the insurance companies. They help insurance...
Words: 1927 - Pages: 8
...WorldCom history The history of WorldCom Company dates back in 1983 which started as a partnership between a former basketball coach Bernard Ebbers. This company was established at Mississippi as a coffee shop, which later developed to long distance Telephone Company. The company’s name initially was Long Distance Discount Service whose operations began on 1984. After several years in operation, the company became public in August 1989 with Bernard Ebbers as the company’s CEO (Moberg 4). Over the years, the company developed through mergers and acquisitions and becomes public in the year 1989. The notable merge which enabled the company to go public was the merger with the advantage companies Inc. This led to changing of the name from just LDDS to LDDS WorldCom in 1995 and to just WorldCom a year later (Moberg 4). In 1993, the company acquires long distance providers in the name of Resurgence Communications Group and Metromedia communications. This made history as the fourth largest long distance communication firm in United States. There were also several other mergers and acquisitions such as with IDB in 1994, WilTel in 1995, MFS communications in 1996, and the greatest merger which involved MCI communications. In 1998, WorldCom completed the merger with MCI at a cost estimated to be $40 billion. This was viewed as the greatest merger after brooks fiber properties and CompuServe which were valued at $ 1.2 and $ 1.3 billion respectively (Moberg 6). Another notable aspect...
Words: 2628 - Pages: 11
...Home Page» Business and Management World Com In: Business and Management World Com 9-104-071 REV: SEPTEMBER 14, 2007 ROBERT S. KAPLAN DAVID KIRON Accounting Fraud at WorldCom WorldCom could not have failed as a result of the actions of a limited number of individuals. Rather, there was a broad breakdown of the system of internal controls, corporate governance and individual responsibility, all of which worked together to create a culture in which few persons took responsibility until it was too late. — Richard Thornburgh, former U.S. attorney general1 On July 21, 2002, WorldCom Group, a telecommunications company with more than $30 billion in revenues, $104 billion in assets, and 60,000 employees, filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. Between 1999 and 2002, WorldCom had overstated its pretax income by at least $7 billion, a deliberate miscalculation that was, at the time, the largest in history. The company subsequently wrote down about $82 billion (more than 75%) of its reported assets.2 WorldCom’s stock, once valued at $180 billion, became nearly worthless. Seventeen thousand employees lost their jobs; many left the company with worthless retirement accounts. The company’s bankruptcy also jeopardized service to WorldCom’s 20 million retail customers and on government contracts affecting 80 million Social Security beneficiaries, air traffic control for the Federal Aviation Association, network management...
Words: 317 - Pages: 2
...371427 WorldCom, the United States second largest telecommunication company stunned the world by filing bankruptcy in July of 2002. The downfall of WorldCom did not just affect the employees, retailers, the government, but also the bankers. WorldCom was a multi-billion dollar telecommunications business that was founded in 1983. They started their business under the name ‘Long Distance Discount Services’ (LDDS) providing long distance telecommunication amenities. In 1985, Bernie Embers became the company’s CEO, in 1995; the company changed its name to WorldCom. Throughout the 1990’s, WorldCom increases its growth through series of successful acquisitions and mergers. Nevertheless in the late 1999, WorldCom’s performance begins to decrease in due to the upward of overcapacity, competition, and reduced demand for telecommunication services at the start of the economic recession and the result of the dot-com bubble downfall. All these burdens triggered WorldCom to become involved in accounting fraud and cook the books. WorldCom’s CFO Scoot Sullivan began the process of mismanaging as capital expenditure with what should have been normal expenses, therefore turning losses in profit, creating a camouflage that the company is carrying out well. Until June of 2002, things started to unravel and the company’s stock price plunged. Investigations were carried out and on June 25, WorldCom admits that it had inflated its earnings by $3.8 billion. After several investigations...
Words: 614 - Pages: 3
...World Com DESCRIBE FACTS AND IDENTIFICATION OF ETHICAL ISSUES OF WORLD COM MARTHA STEWART 1. WHAT WAS THE BASIS OF MARTHA STEWART’S REPUTATION? FROM A FINANCIAL PINT OF VIEW, HER REPUTATION WAS BASED ON MARKET SHARE AND STOCK PRICE IMCLONE SUBMITS APPLICATION FOR ERBITUX TO THE FDA. OCTOBER 31, 2001 SAM WAKSAL IS TIPPED THAT THE FOOD DRUG ADMINISTRATION (FDA) PLANS TO DENY IMCLONE'S APPLICATION FOR ERBITUX. DECEMBER 26, 2001 STEWART AND WAKSAL'S FAMILY MEMBERS SELL SHARES OF IMCLONE STOCK. DECEMBER 27, 2001 THE FDA OFFICIALLY REJECTS ERBITUX. AS EXPECTED, IMCLONE STOCK PRICE DROPS 18%. DECEMBER 28, 2001 PETER BACANOVIC TELLS SEC ATTORNEYS THAT ON DECEMBER 20TH STEWART MADE THE ORDER TO SELL IMCLONE STOCK IF THE PRICE FELL BELOW $60. JANUARY 7, 2002 SAM WAKSAL IS ARRESTED AND CHARGED WITH INSIDER TRADING. JUNE 12, 2002 DOUGLAS FANEUIL PLEADS GUILTY TO TAKING A PAYOFF TO KEEP QUIET ABOUT THE STEWART STOCK TRADE. OCTOBER 2, 2002 WAKSAL ADMITS TO ATTEMPTING TO SELL HIS OWN SHARES AND TIPPING HIS DAUGHTER. OCTOBER 15, 2002 STEWART AND BACANOVIC ARE INDICTED ON 9 FEDERAL COUNTS IN THE IMCLONE SCANDAL. JUNE 4, 2003 WAKSAL IS SENTENCED TO MORE THAN 7 YEARS IN PRISON. JUNE 10, 2003 INK EXPERT TESTIFIES AGAINST FORGED DOCUMENTS SUPPORTING $60 STOP LOSS ORDER. FEBRUARY 19, 2004 STEWART'S BUSINESS...
Words: 306 - Pages: 2
...There are certain things about voting by mail we know to be true. Voting by mail is safe; voting by mail is fair; and voting by mail is cost efficient. We can look to the states currently using a universal vote by mail system as proof of these claims. Let’s start with the statistics. Oregon’s Secretary of State reported there were two cases of voter fraud in 2016; neither required prosecution. (Source: kobi5.com/news). Washington’s Secretary of State said there was no evidence of voter fraud anywhere in the state during the 2016 general election; (Source: www.washingtontimes.com); and in Colorado there were 32 voting offenses recorded from 2012 to 2016, but only four resulted in convictions. In terms of execution every state using a vote by mail system requires ballots to be sealed inside a series of security envelopes with a signature on the outside-most envelope. Upon receipt, trained officials verify the signature to confirm the sender is in fact who they say they are, and that they are a registered voter. Only after successful authentication is the enclosed ballot electronically tabulated. This maintains voters’ confidentiality....
Words: 630 - Pages: 3
...records are important to promote healthy business decisions. If a company is not able to maintain proper financial records of income and expenditures the company has little chance of surviving. This is the purpose behind accounting. Accounting as defined is the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results (Merriam-Webster, 2013). This amount of control opens the door for opportunities of producing financial records that can be fraudulent and unethical. Since the turn of the century, into the 2000’s, there have been numerous scandals that have rocked the finance world. Most notably the Enron scandal has been the most widely publicized accounting scandal. Enron was a multi-billion dollar corporation supplying energy sources in the United States. Fraud, false reporting of revenues, and poor accounting eventually caused the collapse of this powerful corporation and the loss of thousands of jobs (Raver, 2006). The collapse of this energy giant prompted Congress to pass the Sarbanes-Oxley Act of 2002. This act establishes rules to govern the way businesses trading on the open market have to report their financial status. Sarbanes-Oxley has set in place guidelines how financial reports are to be prepared and submitted for public use, as well as guidelines for the ethical practices senior financial officers are to abide by. This act also establishes penalties...
Words: 499 - Pages: 2