2.1 -------------- 1. The business conduct that led to the WorldCom and Enron scandals was unethical‚ but not all of the behavior was illegal. Please discuss why Boatright explains in the Why the Law is Not Enough section of our text‚ “reliance on the law alone is a prescription for disaster.” (2012‚ p. 10) -------------- Reliance on the law‚ alone‚ is a prescription for disaster. This is true for several reasons. For starters‚ the law is not always appropriate when it comes to helping regulate
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connection with business combination and wrongful us of off-balance-sheet arrangements. WorldCom was use creative accounting in order to make the financial accounting records to look good which is the profit increasing. They was used a liberal interpretation of accounting rules when preparing the financial statements. While the company acquiring MCI‚ it give the management opportunity to make the creative accounting. WorldCom had devalued hard assets while simultaneously increasing the amount of goodwill
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Table of Contents Letter of Intent i Introduction 1 Purpose and Scope 1 Assumptions 1 Fraud Enron 2 Tyco 2 World Com 3 Understanding SOX 4 Conclusion 5 References 6 INTRODUCTION Sarbanes-Oxley Act of 2002 is the most far-reaching change in organizational control and accounting regulations since the Securities and Exchange Act of
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federal law‚ which is established in order to set out the some standards for accounting firms‚ public company boards and management. These standards are established in order to overcome the problem of accounting scandals. Companies such as Enron and WorldCom have created major accounting scandals. Sarbanes-Oxley Act protects the investors from the accounting scandals and frauds created by corporations (Vay‚ 2006). It has also introduced provision for the improvement in internal auditing of the firm.
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1990’s and early 2000’s‚ Enron and WorldCom seemed to be on the top of the ‘business’ world. Wall Street was singing their praises‚ stockholders and employees were giddy with excitement about how much money their companies were making‚ and top executives and other key players got ridiculously rich. But in a few short years‚ the façade would come tumbling down for each of these companies and the world would see how unethical behavior and greed destroyed Enron and WorldCom. Knowing what is morally
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observe. But‚ when things go wrong‚ they can become the center of attention. Certainly this was true of the Enron‚ Worldcom‚ and Parmalat scandals. The directors of Enron and Worldcom‚ in particular‚ were held liable for the fraud that occurred: Enron directors had to pay $168 million to investor plaintiffs‚ of which $13 million was out of pocket (not covered by insurance); and Worldcom directors had to pay $36 million‚ of which $18 million was out of pocket. As a consequence of these scandals and
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fixed-rate leases for network capacity WorldCom initiated in order to meet the anticipated increase in customer demand. And as later the demand was not as expected‚ the Company has to pay for the leases that were substantially underutilized to avoid punitive termination provisions. The line costs that WorldCom capitalized were ongoing‚ operating expenses that accounting rules required WorldCom to recognize immediately. Instead of expense the cost currently‚ WorldCom capitalized it to exaggerate its pre-tax
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Business Ethics Doug Donofrio FIN/486 May 27‚ 2013 Mary Corcutt Eron and WorldCom are both companies that collapsed due to ethical violations. The major factors that lead to the dissolution of Enron Corporations and WorldCom will be indentified. The specific ethical violations in accounting practices at these two companies will be explained and the role of business ethics in strategic financial planning will be described. “Business Ethics are the standards of conduct or moral judgment that
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publically traded companies. Every week brought different news on misrepresentations at major American corporations and financial institutions. As soon as the report of accounting fraud at Enron reached public‚ media revealed similar scandals at WorldCom‚ Tyco and number of other publically traded companies. Improper revenue recognition‚ incorrectly recorded expenses‚ and other practices to manipulate financial statements along with briberies to auditors for covering the fraud caused the biggest
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users. In 2002‚ WorldCom a telecommunication company‚ filed for bankruptcy. It was later revealed that the company was involved with improper accounting in two major forms. First WorldCom inflated revenues to increase profits‚ thereby increasing stock prices‚ and increasing the satisfaction of stakeholders. Second‚ the company understated line costs. Revenue is important to users of financial statements because it helps them evaluate a company’s performance and prospects. WorldCom violated the revenue
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