Assignment # 3 Worldcom Accounting Scandal

1495 Words May 28th, 2011 6 Pages
Assignment # 3
WorldCom Accounting Fraud

By
Mark A. Cowan

Strayer University
ACC 499- Accounting Capstone
May 15, 2011

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, and the creditability of the accounting profession when corporate fraud is revealed.
First, we must look at WorldCom as a business standpoint. The driving factor
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In practice, it is not always easy to determine at what point legitimate discretion becomes aggressive discretion, or at what point aggressive discretion becomes abusive and fraudulent”. (Accounting Capstone, 433) As one can see it is totally dependent upon the integrity of the accountant as to whether the accrual accounting is above board or not.
Whistleblowing can be defined as the disclosure by a person, in a government agency or private enterprise, to the public or to those in authority, of mismanagement, corruption, illegality, or some other wrongdoing. Since the 1960s, the public value of whistle-blowing has been increasingly recognized. For example, federal and state statutes and regulations have been enacted to protect whistleblowers from various forms of retaliation. Even without a statute, numerous decisions encourage and protect whistleblowing on grounds of public policy. In addition, the federal False Claims Act (31 U.S.C.A. § 3729) will reward a whistleblower who brings a lawsuit against a company that makes a false claim or commits Fraud against the government. (Free dictionary)
Persons who act as whistleblowers are often the subject of retaliation by their employers. Typically the employer will discharge the whistleblower, who is often an at-will employee. An at-will employee is a person without a specific term of…