Case 2-1
Case 2-1
Cynthia Cooper and WorldCom
Cynthia Cooper details her trials and tribulations about her experiences at WorldCom in the book Extraordinary Circumstances: The Journey of a Corporate Whistleblower. The following excerpts from the book describe the actions she took to uncover the fraud at WorldCom and reactions of key players in the accounting department, top management, the audit committee and the external auditors. Cooper was first alerted to the fact that there may have been a problem with capital expenditures when she read an article called “Accounting for Anguish” that appeared in the Fort Worth (Texas) Weekly on May 16, 2002. It described the ordeal of Kim Emigh, a former WorldCom financial analyst who was laid off from the company after complaining for many years about potential abuses related to capital spending. Glyn Smith, a senior manager in Internal Audit, suggested to Cooper that they do an internal audit of capital expenditures immediately. Cooper agreed. The first sign of a problem was when one of the Finance directors provided capital spending schedules for the audit and two of them disagreed in amount. The director said the difference was due to something called “prepaid capacity.” When asked to explain the director couldn’t and said that David Myers, the controller of WorldCom, provides the data to record. He added: “David provides [me] with the amounts for [the] schedule.” Later on a member of the internal audit team with technology knowledge, Gene Morse, is asked to examine the system and see if there was anything designated as prepaid capacity. Morse found prepaid capacity amounts “jumping all over the place, from account to account.” There were numerous examples of items moved from account to account apparently to mask the true nature of the expenditures. As news spreads of the internal audit of capital expenditures, Myers suggested that the team was wasting its time on the audit and that their time would be better spent to
Cynthia Cooper and WorldCom
Cynthia Cooper details her trials and tribulations about her experiences at WorldCom in the book Extraordinary Circumstances: The Journey of a Corporate Whistleblower. The following excerpts from the book describe the actions she took to uncover the fraud at WorldCom and reactions of key players in the accounting department, top management, the audit committee and the external auditors. Cooper was first alerted to the fact that there may have been a problem with capital expenditures when she read an article called “Accounting for Anguish” that appeared in the Fort Worth (Texas) Weekly on May 16, 2002. It described the ordeal of Kim Emigh, a former WorldCom financial analyst who was laid off from the company after complaining for many years about potential abuses related to capital spending. Glyn Smith, a senior manager in Internal Audit, suggested to Cooper that they do an internal audit of capital expenditures immediately. Cooper agreed. The first sign of a problem was when one of the Finance directors provided capital spending schedules for the audit and two of them disagreed in amount. The director said the difference was due to something called “prepaid capacity.” When asked to explain the director couldn’t and said that David Myers, the controller of WorldCom, provides the data to record. He added: “David provides [me] with the amounts for [the] schedule.” Later on a member of the internal audit team with technology knowledge, Gene Morse, is asked to examine the system and see if there was anything designated as prepaid capacity. Morse found prepaid capacity amounts “jumping all over the place, from account to account.” There were numerous examples of items moved from account to account apparently to mask the true nature of the expenditures. As news spreads of the internal audit of capital expenditures, Myers suggested that the team was wasting its time on the audit and that their time would be better spent to