Ethicality of Accounting Activities

Topics: Finance, Fraud, Creative accounting Pages: 3 (713 words) Published: July 8, 2013

Ethicality of Accounting Activities Assignment
WorldCom Case
ETH/376 – Accounting Ethics and Professional Regulations

WorldCom, once a thriving multi-million dollar business which became the second largest telecommunications company in the United States was forced to close their doors when discovered that unethical practices and fraudulent activity were exposed thanks to a strong willed internal auditor. WorldCom was at the heart of one of the largest accounting fraud scandals in corporate history. WorldCom filed for bankruptcy protection after the company admitted to accounting fraud. After rigorous investigations into WorldCom’s fraudulent transactions it was discovered that in total they amounted to $11 Billion dollars.

Key Activities in the WorldCom Case
A $500 million entry with no backup or documentation triggered the events that came later and resulted in the downfall of WorldCom. Cynthia Cooper Vice President of Internal Audit for WorldCom, Gene Morse also a WorldCom employee discovered $3.8 billion in expenses that were allocated incorrectly on WorldCom’s books. This was one of the incidents that led Cooper and Morse to suspect that this multi-million dollar organization was “cooking the books”. According to "United States Securities And Exchange Commission Complaint filing" (2002), “From at least as early as 1999 through the first quarter of 2002, WorldCom misled investors. WorldCom has admitted that during this period, as a result of undisclosed and improper accounting, it materially overstated the income it reported in its financial statements by approximately $7.2 billion. In an effort to conceal losses.” WorldCom manipulated their financials by reducing its operating expenses and reclassifying certain operating costs as capital assets.

AICPA Code of Professional Conduct
The unethical accounting practices that WorldCom partook in were...
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