Worldcom Scandal Case

Capital; expenditures decline from 45.8% of revenues in 1995 to 10.8% of revenues by 2001 (also close to Microsoft’s experience);

There were times when Worldcom HAD excess accruals and chose not to release them. This was to sustain the financial Line E/R ratio. This is definitely not an appropriate practice because expenses need to be recognized in accordance with the matching principle. It is not acceptable to hold expenses for a later date when you have excess revenue and can afford to recognize held back expenses.

Cynthia Cooper was contemplating over this whole debacle with what was the right decision to make with her discovering “almost four billion dollars in questionable accounting entries”. (Mead) While contemplating something crossed her mind on deciding if she should speak up and become known as a whistleblower, is that her findings could cost WorldCom’s credibility, about seventy thousand employees would lose their jobs, and also pension funds that were loaded with WorldCom stock. Her job as an internal auditor she had a responsibility to WorldCom’s Stockholders and also her own conscious to do something like as the fraud that was uncovered was so

6. If not, what were the sources of cash the firm used to pay for the capital expenditures and/or dividends?

Even though most of these expenses are not of big magnitude their value can add up and affect the company’s finances. Some of these items are accrued time for employees, bonuses, benefits, utilities, improvements and taxes. Some additional sources of working capital include; cash reserves, profits, equity loans, line of credit, and long term loans.

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.

By then the purchase price for WJRJ was 2.5 million & other business’s like it went for many times that. He paid it with swap engineer in such way he didn’t have to put a penny down. “Within in year the company was breaking even, by 1963 it was maki8ng a million dollar in

Revenues of Dell increased on 1285% against 660% of Compaq (1992-1998). From this data it can be seen that at Dell net income gross exceeds the revenue gross, while Compaq didn 't succeed to use the revenues incline to make income.

The largest percentage decrease on Lockheed Martin’s income statement is ‘Other Operating Expense’, or the ‘Other Unallocated’ ac-count. This account includes FAS/CAS adjustment (Non-GAAP pension plans measures specifically allowed to defense contractors and U.S. government agencies), stock-based compensation, and other costs. A positive number here represents an offset between the GAAP FAS pension expense account and the Non-GAAP CAS pension e-pense account, which lowered the cost of pensions payable, as well as a profit in operations other than the five major business segments.

I learned some new things from the case article that were not mentioned in Cynthia Cooper’s book titled Extraordinary Circumstances. However, the gist of it was the same. I will focus my paragraphs based on the three questions.

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.

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.

WM shows a steady increase in the amount of cash generated by operating activities in the last three years, while SRC shows a negative operating cash flow in 1997. During this last year, WM used its operating cash flow to finance both new expansion activities and financing activities (mainly a stock repurchase plan). SRC, on the other hand, had to take new

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

WorldCom was U.S based Telecommunications Company. It was second greatest long partition phone association in U.S., which had been working together since 19th century. It was built up in 1968. It was the benchmark long partition telecom and web access. Today, it is perhaps best known for a bookkeeping embarrassment that stimulated the association shred for insolvency security in 2002. WorldCom overseers effectively exaggerated the association 's bookkeeping numbers, enlargement the association 's preferences by around $12 billion dollars. The snappy insolvency that took after incited colossal hardships for theorists. WorldCom part 11 was the greatest liquidation in U.S. history and this was as a standout amongst the most exceedingly terrible wrongdoing in corporate world in U.S. history. Between July 2002 when WorldCom chose non-portion and April 2004 when it rose up out of part 11 as MCI, association forces worked intensely restate the financials and overhaul the association. This part of insolvency impact on customers who was using long division organization. The WorldCom recording recorded more than $107 billion in resources, far surpassing those of Enron, which asked for liquidation last December. The WorldCom recording had been expected after the association uncovered in late June that it had shamefully identified with more than $3.8 billion of costs.