An Ethical Dilemma at WorldCom: A case study of Cynthia Cooper The Scenario One May afternoon‚ while sitting in his cubicle at WorldCom Inc. headquarters located in Clinton‚ Mississippi‚ Gene Morse was stunned to find an accounting entry for $500 million in expenses‚ which was not accounted for with any invoices. He immediately reported this entry to his boss‚ vice president of internal audit Cynthia Cooper (Pulliam & Solomon‚ 2002). Little did they know at the time that this discovery would begin
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CASE 3 : Accounting Fraud at WolrdCom Table of Contents Introduction....................................................................................................................... 1 Question 1 .......................................................................................................................... 2 Question 2 .......................................................................................................................... 4 Question 3 ..........................
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Accounting Fraud at WorldCom 1) What are the pressures that lead executives and managers to “cook the books?” After the rapid evolution of the telecommunication industry in the 1990s‚ WorldCom shifted its strategy to focus on building revenues and acquiring capacity sufficient to handle expected growth. Their biggest goal was to be the No. 1 stock on Wall Street rather than capturing the market share. As a result‚ their Expense-to-Revenue (E/R) Ratio was their measurement for their main objective
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Case study on WorldCom THE WORLDCOM FRAUD:- Presented By: Pratik WorldCom’s Background • Awoke the sleeping giant by leading the telecom industry into profitability in the 90’s. • During the 1990’s‚ WorldCom was deeply involved in acquisitions and completed several “mega-deals” • Purchased over 60 firms in 2nd half of the 90’s • WorldCom moved into Internet and data traffic • Handled 50% of US Internet traffic • Handled 50% of e-mails worldwide WorldCom’s Background (cont.) • Purchased MCI for
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Concepts a. (i.) According to FASB Statement of Concepts No. 6‚ paragraph 25‚ assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. They represent probable future economic benefits controlled by the enterprise. According to FASB Statement of Concepts No 6‚ paragraph 80‚ expenses are outflows or other using up of assets or incurrences of liabilities (or a combination of both) during a period from delivering or producing
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Q 1 Explain the nature of accounting fraud? A1. Background: The origin of WorldCom can be traced to the breakup of AT&T in 1983. The company began as Long Distance Discount Services Inc during 1983. LDD name was changed to WorldCom in 1995. To build the economies of scale that were critical success factor in long distance market it was imperative for WorldCom to grow its available volume off bandwidth as it lowered the per unit costs. Also the Telecommunication act of 1996 permitted long
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CASE NAME: WorldCom: Keeping Planes In the Air 1. Briefly describe the important aspects of the situation. WorldCom had asked its accountant to make accounting entries dipping into reserves to help the company to meet its earnings target. WorldCom had been done these financial reserves for three quarters and intended to do so thereafter. The telecommunications industry was in a severe slump. WorldCom had a slow growth and rising cost. Vinson‚ who had done WorldCom’s accounting
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WorldCom Case Study: Lack of Leadership‚ Lack of Ethics Emily Fearnow ORG 500- Foundations of Effective Management Colorado State University – Global Campus Dr. Cheryl Lentz May 15‚ 2011 WorldCom Case Study: Lack of Leadership‚ Lack of Ethics A multitude of choices made by executives at WorldCom led to the ultimate demise of the company as it was previously known‚ the employees and their livelihoods’‚ and the trust of the American people. In a time when corporations
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Ayusarita Satriani 311368 – IUP BUSINESS UGM Financial Management ENRON Resources: http://en.wikipedia.org/wiki/Enron_scandal ; http://news.bbc.co.uk/2/hi/business/1780075.stm; http://finance.laws.com/enron-scandal-summary Enron is an energy company that successfully grew from nowhere to be America’s seventh largest company‚ which has 21‚000 staff in more than 40 countries in 15 years. It was one of the world’s leading electricity‚ natural gas‚ communications‚ and pulp and paper companies
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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
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