Assignment # 3 WorldCom Accounting Fraud The purpose of this paper is to discuss the aspects of the WorldCom accounting scandal and the effects that this scandal had on the accounting world as we know it. We will discuss the corporate culture at WorldCom and how it contributed to the accounting fraud, how the CEO’s desire to be the #1 stock on Wall Street contributed to the fraud, pressures on accountants to book and release accruals to meet expectations, pros and cons of whistleblowing
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Accounting Fraud at WorldCom WorldCom grew rapidly in the 1980-90s through its various inorganic acquisitions – the resultant was a corporation with a hotchpotch of diverse and unaligned cultures. Exacerbating the situation, the Management (including the Board of Directors and CEO Ebbers) did little,if anything, to address the multiplicity of deontological and consequential ethics coexisting at WorldCom. CEO Ebbers in fact called an internal effort to create a corporate code of conduct a “colossal
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S. KAPLAN D A VI D KIR O N 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
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Accounting Fraud at WorldCom 1) What are the pressures that lead executives and managers to “cook the books?” After the rapid evolution of the telecommunication industry in the 1990s, WorldCom shifted its strategy to focus on building revenues and acquiring capacity sufficient to handle expected growth. Their biggest goal was to be the No. 1 stock on Wall Street rather than capturing the market share. As a result, their Expense-to-Revenue (E/R) Ratio was their measurement for their main objective
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MANAGERIAL ACCOUNTING WORLDCOM How did it cook the books? Nguyen Bao Khanh Student ID: FB60162 Class: FB0662 May 19th, 2012 APENDIX 1. WorldCom’s accounting scandal 2. How did WORLDCOM cook its books? 3. Conclusion WORLDCOM headquarter in Virginia, USA. WORLDCOM’S ACCOUNTING SCANDAL WorldCom, established in 1983, whose CEO was Bernard Ebbers, was the second largest long distance phone company in the US after AT&T. It could be seen as a pride of America until it got into one
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Running Head: WORLDCOM AND ETHICS IN ACCOUNTING 1 WorldCom and Ethics in Accounting Brian Bartram Professor Hogan Strayer University Accounting 557 11/05/2012 WORLDCOM AND ETHICS IN ACCOUNTING 2 There have been many corporate and ethical breeches over the years in financial record keeping but it is believed that the current business and regulatory environment is conducive
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Case Assignment #1 – Accounting Fraud at WorldCom 1. Discuss the fraud at WorldCom in terms of the objective of financial reporting. How was the objective subverted by the actions taken by the managers of WorldCom? A. To begin, the primary objective of financial reporting for most companies is to provide useful information to capital providers. Essentially, the objective is “to assist in the efficient functioning of economies and the efficient allocation of resources in capital markets”
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WorldCom Case Study Requirements 1. The paper must be a minimum of 5 pages in length with 1.5 inch spacing. There is no required font type but it must be legible. Font size cannot be less than 10 nor exceed 14. Use full sentences and avoid using bullet points within the paper. 2. Explain and answer the following questions: a. What are the pressures/forces that lead executives and managers to “cook the books?” b. What is the boundary between earnings smoothing or earnings management
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With the help of Mr Sullivan's financial engineering Mr Ebbers raced the business - now called WorldCom - through 70 deals in four years, buying up competitors and expanding his reach. Along the way the company picked up numerous fans on Wall Street, perhaps most notably Jack Grubman, a telecoms analyst at the prestigious investment bank Salomon Smith Barney. Like many analysts of the time, Mr Grubman believed that to succeed in the new era of the internet and the world wide web companies needed
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Number: SC09MBA10 G. Edward McCullough, M.A. March 25, 2010 Examining a Business Failure: WorldCom Why do businesses fail? Most business corporations experience company failure because of their lack of organizational leadership and unethical practices, which can consist of fraud, conspiracy, falsifying documents, and embezzlement. An example of a business failure is most recognized by the WorldCom (2002) bankruptcy scandal. Many organizational behavior (OB) theories as it relates to leadership
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