Worldcom
Worldcom appeared to be a great success story. However, the success began to unravel with the accumulation of debt and expenses, the fall of the stock market, and long distance rates and revenue. It would take 2 years for the extent of these problems to become public, and accounting scandals like that of Worldcom would make history in the finance and telecommunication areas.
While the intent is to make money to benefit a person or a group of people through illegal acts while disguising their illegal origin, a whistleblower may be lurking amongst you. This history tells us how fragile the monitoring process of the company’s financial system is. Companies often rely on accountants to safeguard company ethics. Accountants have a special responsibility to make sure that managers act with integrity and that information disclosed to customers, suppliers, regulators, and the public is accurate. If accountants do not take this responsibility seriously, or if the company ignores the accountants’ reports, dire consequences can follow. The situation leads to accountancy scandals that hurt investors, employees, and the industries. As the second largest long-distance phone company in the U.S., Worldcom stock dropped from $60 per share to 20 cents per share, Seventeen thousand employees lost their jobs, and in 2002 Worldcom filed the world’s largest bankruptcy (Ulick, 2002). These scandals have left the public with many questions regarding the way companies try to recover from the scandals especially when it comes to fair treatment for the hurt employees.
In addition to revealing sloppy and fraudulent bookkeeping, the post-bankruptcy audit found two important new pieces of information that only served to increase the amount of fraud at WorldCom. First, "WorldCom had overvalued several acquisitions by a total of $5.8 billion"(McCafferty, 2004). In addition, Sullivan and Ebbers, "had claimed a pretax profit for 2000 of $7.6 billion" (McCafferty, 2004). In reality, WorldCom lost
While the intent is to make money to benefit a person or a group of people through illegal acts while disguising their illegal origin, a whistleblower may be lurking amongst you. This history tells us how fragile the monitoring process of the company’s financial system is. Companies often rely on accountants to safeguard company ethics. Accountants have a special responsibility to make sure that managers act with integrity and that information disclosed to customers, suppliers, regulators, and the public is accurate. If accountants do not take this responsibility seriously, or if the company ignores the accountants’ reports, dire consequences can follow. The situation leads to accountancy scandals that hurt investors, employees, and the industries. As the second largest long-distance phone company in the U.S., Worldcom stock dropped from $60 per share to 20 cents per share, Seventeen thousand employees lost their jobs, and in 2002 Worldcom filed the world’s largest bankruptcy (Ulick, 2002). These scandals have left the public with many questions regarding the way companies try to recover from the scandals especially when it comes to fair treatment for the hurt employees.
In addition to revealing sloppy and fraudulent bookkeeping, the post-bankruptcy audit found two important new pieces of information that only served to increase the amount of fraud at WorldCom. First, "WorldCom had overvalued several acquisitions by a total of $5.8 billion"(McCafferty, 2004). In addition, Sullivan and Ebbers, "had claimed a pretax profit for 2000 of $7.6 billion" (McCafferty, 2004). In reality, WorldCom lost
References: Alexander, Steve. Star Tribune. "Former Holders of MCI Stock Miss Out: The bidding war for MCI will enrich the firm 's shareholders - the current ones."1 May 2005. Web. http://www.highbeam.com/doc/1G1-132098938.html Associated Press. MSNBC. MCI Emerges from Bankruptcy. April 2004. Web. http://www.msnbc.msn.com/id/4785653/ns/business-corporate_scandals/t/mci-emerges-bankruptcy/#.T8urSI4gKfQ Grill, Bennet. (n.d.) Gaebler Ventures. Web. http://www.gaebler.com/The-Sarbanes-Oxley-Act-An-Introduction.htm Hitzig, Neal J. (n.d). The Accounting Journal. The Hidden Risk in Analytical Procedure: What Worldcom Revealed. Web. http://www.fraudlaw.org/Fraud/Fraud%20by%20Type/Public%20Companies/World%20Com/How%20auditors%20failed%20WorldCom.htm McCafferty, Joseph. CFO Magazine. "Extreme Makeover: How Robert Blakely and an Army of Accountants Turned Fraud-ridden WorldCom into Squeaky-clean MCI." July 2004. Web. http://www.cfo.com/printable/article.cfm/3014763?f=options Romero, Simon and Riva Atlas. The New York Times. Worldcom’s Collapse: The Overview; Worldcom files for Bankruptcy; Largest U.S. Case. 22 July 2002. Web. http://www.nytimes.com/2002/07/22/us/worldcom-s-collapse-the-overview-worldcom-files-for-bankruptcy-largest-us-case.html?src=pm Ulick, Jake. CNN Money. Worldcom’s Financial Bomb. 26, June 2002. Web. http://money.cnn.com/2002/06/25/news/worldcom/index.htm