Analyzing The Fraudulent Activities Of Worldcom

LDDS started with about $650,000 in capital but soon accumulated $1.5 million in debt since it

With different industry definitions and viewpoints, fraud can be a tough issue for audit committee members to grasp for oversight purposes. The legal obligations of audit committee members have intensified because their standard duty of care and loyalty to the entity has increased in light of management fraud activities.

The stakeholders in this fraudulent case of WorldCom consist of Bernie Ebbers, Scott Sullivan, Buford Yates, David Myers, Cynthia Cooper, and Betty Vinson belong to the company. While the other stakeholders would consist of the creditors, Andersen (accounting firm), investors, and the public. This fraudulent act committed within WorldCom impacted every single stakeholder in a way. Either in a negative or positive way, most of the impact was caused with harm to everyone. The main individuals such as Ebbers, Sullivan, and Vinson all had major consequences as resulting with the fraud. Criminal trials were a major result with their fraudulent acts within WorldCom. Cooper was a lifesaver by most of the community. Aside from these individuals, the rest also got affected by the fraud. Investments conducted by the investors were all lost within the fraud process. The impact towards much of the image for Andersen was ruined. Many of the public lost their trust on the honesty and professionalism of Andersen and other certified public accounting firms. The entire employees from the top management to the smaller group of workers stayed unemployed and some with criminal punishment.

Deception, whether intentional or not, did occur. The shareholders had a right to know the financial state of WorldCom. In Ebber’s defense, he had unscrupulous bed fellows on this board. Their intentions are also at question especially regarding their eagerness to grant Mr. Ebbers a breathtaking loan for $341 million dollar at an interest rate of 2% to shield the instability of the company’s financial situation from shareholders. There were also some concerns whether such loans were ethical from the Security Exchange Commission Enforcement official Seth Taube. He stated that large loans to senior executives are commonly sweetheart deals involving interest rates that constitute a poor return on company assets. Federal prosecutors in New York cited Ebbers 's expensive lifestyle, and his overspending, as a motive to hide WorldCom 's mounting financial troubles. The impropriety associated with the largest loan any publicly traded company has lent to one of its officers in recent memory is evident. Unfortunately, if Ebbers had pressed the matter and sold his stock, he would have escaped the bankruptcy financially whole, but Ebbers honestly thought WorldCom would recover.”

WorldCom and The Mississippi Scheme are both large financial scandals that have occurred. WorldCom was a telecommunication company that overstated their cash flow by reporting $7.6 billion in operating expenses as capital expenses. WorldCom is the largest accounting scandal in US history as of March 2002. The Mississippi Scheme was a business scheme that destroyed the economy of France during the 1700’s. The scheme involved the loss of paper money’s purchasing power as a result of asset inflation. Both WorldCom and The Mississippi Scheme were frauds involving manipulation to create higher stock prices and dubious practices within the organizations to keep the public unaware.

This is case study of what caused the increase and fall of Nortel and what might be done to stop it. problems with misreported monetary information, board structure and the potential for fraud might are prevented if Nortel had taken preventative measures and had a written fraud interference policy. Having a Code of Ethics and a Code of Conduct in situ helps to align managers with the interests of the stakeholders and is for the bigger sensible of the corporate. It additionally permits the corporate to proceed with prosecution of the party or parties concerned within the fraud. Processes place into place to stop fraud by workers

In October 2001, Enron Corporation which was one of the world major energy, commodities and service companies with claimed revenues of nearly 111 billion dollars during 2000 collapsed under the weight of massive fraud in that it has become largest bankruptcy recognition in the US economy. Enron’s earning report was extremely skewed that losses were not represented in their entirety, prompting more and more wishing to participate in what seemed like a profitable company. After collapse of Enron, Auditor independence has become a social issue that weather auditor has to be independent or not. In addition, while auditing must consider matters objectively with dispassion, there were still doubts whether it implemented well. Further, there has been much speculation about the need for the mandatory rotation of auditors or audit firm rotation to warn false accounting between audit firm and client. By examining Enron case, this essay will discuss about advantages and drawbacks of the mandatory rotation of

This leads into my second pressure, which deals with personal lives. Employees were receiving tremendous benefits due to the company’s great performance. However, if the company did not improve, people’s salaries would be cut or even worse, their jobs would be cut. That is why so many people were willing to engage in the fraud, because they felt WorldCom was supplying a salary and benefits that other companies would not be able to match. Betty Vinson was a prime example. She knew that releasing line accruals was wrong, but needed to

Due to these criminal activities, many top executives were convicted fraud and sentenced to spend time in prison. WorldCom activities did not align with the company's overall mission and goals. The actions taken by management were not in the best interest of the customer instead they were consumed with acquisitions and increasing the value of WorldCom Shares. The management also should have considered general accounting practices during their strategic planning. Furthermore, create procedures that protect all stakeholders within the firm.

The auditing firm has been in engagement with the company throughout the period when the fraud was being committed. One of the common and clear indicators of possible fraud was the company’s cash flow statement. The company experienced positive growth in its profits from the year 1996 through to the year 1998. However, a close analysis of the cash flow statement shows that the company had experienced negative figures of cash flow from both operating and investing activities and positive cash flow from financing activities which would not sufficiently offset the negative cash flows from operating and investing. It is therefore evident

On March 15, 2005 former CEO of WorldCom, Bernard Ebbers sat in a federal courtroom waiting for the verdict. As the former CEO of WorldCom, Ebbers was accused of being personally responsible for the financial destruction of the communications giant. An internal investigation had uncovered $11 billion dollars in fraudulent accounting practices. Later a second report in 2003 found that during Ebber’s 2001 tenure as CEO, the company had over-reported earnings and understated expenses by an astonishing $74.5 billion dollars (Martin, 2005, para 3). This report included the mismanagement of funds, unethical lending practices among its top executives, and false bookkeeping which led to loss of tens of thousands of its employees.

WorldCom was the ultimate success story among telecommunications companies. Bernard Ebbers took the reigns as CEO in 1985 and turned the company into a highly profitable one, at least on the outside. In 2002, Ebbers resigned, WorldCom admitted fraud and the company declared bankruptcy (Noe, Hollenbeck, Gerhart, &Wright 2007). The company was at the heart of one of the biggest accounting frauds seen in the United States. The demise of this telecommunications monster can be accredited to many factors including their aggressive-defensive organizational culture based on power and the bullying tactics that they employed. However, this fiasco could have been prevented if WorldCom had designed a system of checks and balances that would have

A number of financial statement frauds went undetected from auditors in past and attracted a high profile attention. The businessmen add fake assets or transfer the assets of companies to their personal assets and result in accounting scandals when the affected companies are bankrupted or are even close of bankruptcy. Just to mention a few names, accounting scandals of Enron, AOL Time Warner and Xerox are among the hottest accounting scandals of the century. This means that despite presence of professional auditors accounting scandals happen and there is a need to learn from the mistakes of the auditors who overlooked these activities. In this report the case study of Xerox is analyzed in detail to highlight violations of accounting principles and present an example from which lessons can be learnt for the future.

From the time of WorldCom’s inception there always seemed to be a tradition in management as if the company was only 100 or so employees. There was a “good old boys” mentality among the limited few running the company and if you were outside that circle then were told only what they wanted you to hear. An unspoken rule among employees was to do what you were told without questions or risk the consequences. One example of this situation occurred when senior management member Gene Morse told an employee “If you show those damn numbers to the f****ing auditors, I’ll throw you out the window” (Kaplan, R.S., & Kiron, D., 2007, p. 3).WorldCom showed no concern regarding an employee’s need and obligation to voice concerns on matters related

This paper will discuss the corporation WorldCom, a telecommunications company that was based in Mississippi. In 2002 WorldCom was involved in one of the largest accounting scandals in the United States. WorldCom inflated its assets by nearly $11 billion dollars, which eventually lead to about 30,000 employees losing their jobs, as well as, 180-billion dollars in losses for its investors. The CEO at the time of this accounting fraud was Bernard Ebbers and led to him receiving a 25-year prison sentence. This paper will go into the details of how WorldCom was able to manipulate its accounting records to deceive its internal auditors, as well as, investors.