Extraordinary Circumstance Review
Introduction and Aim of the Review
This review of WorldCom is based on the Extraordinary Circumstances by Cynthia Cooper. The purpose of review report is to conclude whether WorldCom satisfied the Code of Ethics and the Attribute and Performance Standards set forth by the IIA.
Background
WorldCom was one of the largest telecom companies in the world during 1996 to 2002. The company helped to grow a small regional company that bought and re-sold long distance in the South into an international behemoth that operated in over 65 countries. However, in 2002, the senior management and employees perpetrated a massive fraud, and in June, WorldCom announced that it had “misstated” its financial statements over the last five quarters by $3.8 billion. After coming out this scandal, WorldCom went bankrupt , and it has been the largest bankruptcy ever.
Analysis
Based on the book Cynthia Cooper wrote, WorldCom didn’t comply with the Code of Ethics and the Attribute and Performance Standards.
Fraud
The internet bubble that burst in March, 2000 is followed with much larger and more devastating collapse: Telecom. WorldCom’s financial statements were far worse than expectation that would result in stock price fall, downgrading company and most importantly—losing capital to acquire companies. Then CEO and CFO were planning to change the financial statements with mid-level accountants. They thought if the financial statements were better in next quarter, they could cover the change. But things didn’t go according to plan. They had to change the number until the whistle blew.
Lack of risks assessment
During the WorldCom expansion, CEO, Bernie led the company through 70 acquisitions in less than 20 years. Bernie was too audacious to expand the company without consideration. For example, when board didn’t want to invest any more capital or incur more debt on telecom, Bernie mortgaged everything he had to buy TMC outright. The strategy helps LDDS expand, but also planted bomb
This review of WorldCom is based on the Extraordinary Circumstances by Cynthia Cooper. The purpose of review report is to conclude whether WorldCom satisfied the Code of Ethics and the Attribute and Performance Standards set forth by the IIA.
Background
WorldCom was one of the largest telecom companies in the world during 1996 to 2002. The company helped to grow a small regional company that bought and re-sold long distance in the South into an international behemoth that operated in over 65 countries. However, in 2002, the senior management and employees perpetrated a massive fraud, and in June, WorldCom announced that it had “misstated” its financial statements over the last five quarters by $3.8 billion. After coming out this scandal, WorldCom went bankrupt , and it has been the largest bankruptcy ever.
Analysis
Based on the book Cynthia Cooper wrote, WorldCom didn’t comply with the Code of Ethics and the Attribute and Performance Standards.
Fraud
The internet bubble that burst in March, 2000 is followed with much larger and more devastating collapse: Telecom. WorldCom’s financial statements were far worse than expectation that would result in stock price fall, downgrading company and most importantly—losing capital to acquire companies. Then CEO and CFO were planning to change the financial statements with mid-level accountants. They thought if the financial statements were better in next quarter, they could cover the change. But things didn’t go according to plan. They had to change the number until the whistle blew.
Lack of risks assessment
During the WorldCom expansion, CEO, Bernie led the company through 70 acquisitions in less than 20 years. Bernie was too audacious to expand the company without consideration. For example, when board didn’t want to invest any more capital or incur more debt on telecom, Bernie mortgaged everything he had to buy TMC outright. The strategy helps LDDS expand, but also planted bomb