The Demand for Audit and Other Assurance Services O ssu a S s Chapter 1 ©2012 Prentice Hall Business Publishing‚ Auditing 14/e‚ Arens/Elder/Beasley Arens/Elder/Beasley 1-1 SarbanesSarbanes-Oxley Act Enron WorldCom The Act established the Public Company Accounting Oversight Board. It also requires auditors to report on the effectiveness of internal control over financial reporting. ©2012 Prentice Hall Business Publishing‚ Auditing 14/e‚ Arens/Elder/Beasley Arens/Elder/Beasley 1-2
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Introduction WorldCom was America ’s second largest telecom company in 2000 (The WorldCom Accounting Scandal‚ 2002). Making a modest beginning in the hinterland of Mississippi in 1983 with a meager capital of less than 100‚000 USD it reached the pinnacle of corporate success reporting more than USD 39 billion in revenue and USD 150 million in MCAP (The WorldCom Accounting Scandal‚ 2002). In the process it became 42nd in the Fortune 500 list. Under the leadership of CEO Bernie Ebbers it grew rapidly
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manners that in the long run caused three of the largest corporate scandals of Enron‚ Tyco‚ and WorldCom. Before filing for bankruptcy in 2001‚ Enron Corporation was one of the largest integrated natural gas and electricity companies in the world. It marketed natural gas liquids worldwide and operated one of the largest natural gas transmission systems in the world‚ totaling more than 36‚000 miles. It was also one of the largest independent developers and producers of electricity in the world‚ serving
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The Rise and fall of WorldCom This case study WorldCom is a telecommunications company which was led by CEO‚ Bernard Ebbers‚ and CFO‚ Scott Sullivan. In 1999‚ WorldCom was not meeting Wall Street’s revenue and earnings expectations‚ and it appeared that the coming year would produce more bad news. The CFO argued for setting realistic targets. However‚ the CEO insisted that the company needed double digit growth‚ and pushed for aggressive targets. A great deal of focus was not putting on “team work”
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Accounting Fraud at WorldCom Vanessa Gail Woods Strayer University Connor-Green/ACC 576 March 21‚ 2010 Accounting Fraud at WorldCom The break up of AT&T opened the long distance service market to small companies during the mid- to late-1980s and 1990s. Long Distance Discount Service (LDDS) opened in 1983 with moderate growth until its stock went public in 1989. CEO Bernie Ebbers decided to grow the organization through acquisitions (70 companies over the course of its lifetime)
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Were the colonists morally justified in declaring independence? British government actions were unfair to the colonists‚ and the colonists had the right to rebel against British rule resulting in the American Revolution for the fight for independence. Reasons colonists justified for independence was taxation policies were unfair‚ no representation in the Parliament‚ and many passed acts and laws. The unfair policies‚ acts‚ and laws were immoral and corrupt to the colonist’s rights that lead to an
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Creative accounting refers to accounting practices that seem to follow the letter of the applicable accounting standards but deviate from the spirit of those standards. It is the use of accounting methods to hide aspects of a company’s financial dealings in order to make the company appear more or less successful than it is in reality. In other words‚ Creative accounting is the transformation of financial accounting figures from what they actually are to what preparers desire by taking advantage
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operations got Enron into difficulties? * The fact that Kopper was appointed to Fastow and he was an employee at Enron was the first thing that got them into trouble. Another reason was that over 11 million was invested and it ended up not being invested at all. I believe these two situations ended up being the start of Enron’s problems. Enron also was not reporting the revenue for service correctly and his stock was paid by promissory notes and not by cash like most business operates.
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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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WORLDCOM‚ INC: CORPORATE BOND ISSUANCE 1. IS IT A GOOD TIME FOR WORLDCOM‚ INC. TO ISSUE? CONSIDER FACTORS IN FAVOR AND FACTORS THAT ARE NOT IN FAVOR. Personally I believe that the time is not in favor of WorldCom in undertaking one of the largest bond issues at the time. Even though there are many advantages with proceeding with the issue‚ I believe that the degree and the uncertainty raised by some of the disadvantages outweigh the advantages of going ahead with the $6Billion
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