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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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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The WorldCom scandal was actually brought to light by the internal auditor‚ Cynthia Cooper. Cooper and her team‚ Gene Morse and Glyn Smith uncovered the fact that line costs were being transferred to capital accounts. Cooper was originally tipped off to the fact that something was amiss when the head of WorldCom’s wireless business paid her a visit‚ upset that he was loosing $400 million that had been set aside to make up for shortfalls if customers didn’t pay their bills. Scott Sullivan‚ CFO of
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M1. Case Study Assignment: Fraud at WorldCom 1. Who were the major characters in WorldCom? There are a couple of major characters that played their roles in the downfall of WorldCom. Mr. Bernard J. (Bernie) Ebbers‚ one of the founders of the original small long-distance carrier‚ was asked to take charge of the company during its early struggles. It was under his tenure that WorldCom began its expanding pursuits and aggressive acquisitions. Although Mr. Ebbers was he head of the company‚ their CFO
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AVOIDING INVESTMENTS IN FRAUDULENT COMPANIES: THE WORLDCOM FRAUD Introduction The purpose of this report is to investigate and discuss the accounting fraud that occurred at WorldCom in order to recommend improved strategies to Berkshire Hathaway’s management for avoiding investments in companies with fraudulent financials. Accounting fraud is a crime committed by high level employees at an organization to manipulate the organization’s financial statements and intentionally disguise company
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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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Corporate Governance WorldCom Scam Introduction MCI WorldCom was one of the largest telecommunications companies in the world. Bernie Ebbers founded WorldCom in 1983‚ after that WorldCom began as a re-seller of long-distance telephone services. WorldCom is located at Mississippi. After Ebbers bought around 50 other small long-distance firms‚ he set his sight on MCI. Thus MCI WorldCom would have become the second biggest telecom service provider in 1997. MCI WorldCom was formed on September-15-1998
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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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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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