Examining a Business Failure: WorldCom WorldCom was one of several large companies that failed because of inadequate organizational leadership‚ fraud‚ conspiracy‚ falsifying documents‚ and embezzlement. WorldCom has been classified as being “one of the biggest corporate scandals in Unites States history” (Zekany‚ 2004‚ p. 101). In 2001‚ the company’s financial condition began to decline due to the slowing telecommunications industry‚ which eventually put pressure on the company’s executive
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Enron and WorldCom FIN/486 December 22‚ 2014 Enron and WorldCom In 1998‚ Waste Management executives acknowledged earnings misstatements of approximately $1.7 billion. With the help of the Arthur Anderson accounting firm‚ Waste Management shareholders lost more than $6 billion dollars (CNN‚ 2001). The Waste Management corruption ushered in a series of corporate scandals into the new millennium. Enron and WorldCom were only two of many ethical and accounting violations that prompted new legislation
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Enron and its Associates Used Questionable Accounting Practices Clearly‚ there have been cases where management knowingly deceived the auditors. Then there seem to be other instances where the accounting treatment envelope was pushed just a bit too far. In the case of Enron‚ David B. Duncan‚ the former Andersen partner in charge of the Enron audit who was the government’s chief witness in the trial against Arthur Andersen‚ stood behind the decisions that resulted in the widespread use of off-balance
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The WorldCom Fraud © 2003‚ 2005 by the AICPA This presentation is intended for use in higher education for instructional purposes only‚ and is not for application in practice. Permission is granted to classroom instructors to photocopy this document for classroom teaching purposes only. All other rights are reserved. Copyright © 2003‚ 2005 by the American Institute of Certified Public Accountants‚ Inc.‚ New York‚ New York. WorldCom’s Background • Awoke the sleeping giant by leading the telecom
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The WorldCom Accounting Scandal WorldCom was started in Mississippi as a long distance telephone service provider in 1983 (Lyke and Jickling‚ 2). Over the next decade and a half‚ the company expanded to offer a whole range of telecommunication services through a series of mergers and acquisitions (Lyke and Jickling‚ 2). At its height‚ WorldCom was the largest long distance phone company in the United States and was one of the leading companies in the telecommunication market in the world‚ providing
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CHAPTER 11 Earnings Management 11.1 Overview 11.2 Patterns of Earnings Management 11.3 Evidence of Earnings Management for Bonus Purposes 11.4 Other Motivations for Earnings Management 11.4.1 Other Contracting Motivations 11.4.2 To Meet Investors’ Earnings Expectations and Maintain Reputation 11.4.3 Initial Public Offerings 11.5 The Good Side of Earnings Management 11.5.1 Blocked Communication 11.5.2 Theory and Empirical Evidence of Good Earnings Management
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WorldCom Scandal A summary of WorldCom fraud would include having to describe the greed that would eventually destroy one of the largest communications companies in the United States and world. A humble motel owner‚ Bernard Ebbers took a small long distance company in 1983 and turned it into one of the most successful businesses in the country. It was not so much the business operations that caused the company to grow but the aggressive acquisitions that made the company grow. In its day‚ CEO Bernard
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WorldCom Scandal Formerly known as WorldCom‚ now known as MCI‚ this U.S.-based telecommunications company was at one time the second-largest long distance phone company in the U.S. Today‚ it is perhaps best known for a massive accounting scandal that led to the company filing for bankruptcy protection in 2002. In 1998‚ the telecommunications industry began to slow down and WorldCom’s stock was declining. CEO Bernard Ebbers came under increasing pressure from banks to cover margin calls on
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WorldCom Sunday‚ November 07‚ 2010 10:27 PM The following entries are hypothetical and intended to illustrate the initial recording‚ and subsequent ‘release’ and ‘capitalization’ of line costs. a. Prepare a journal entry to record $3‚500 million of estimated line costs for quarter 1. DR - Accrued Line cost $3‚500 CR - Cash and Cash Equivalents $3‚500 b. Assume that you find out in quarter 2 that the prior quarter’s estimate was too large by $100 million. Prepare the necessary journal entry
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the actions taken by WorldCom managers not detected earlier? What processes or systems should be in place to prevent or detect quickly the types of actions that occurred in WorldCom? The first reason is that both internal audit and external audit of WorldCom were not performing their role as intended. Generally‚ internal audit mainly focus on the reliability of financial reporting and the effectiveness of operations‚ and reports directly to the Board of Directors. In WorldCom‚ however‚ internal audit
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