3) Roots of the scandal The roots of the fraud and the role of internal auditors As explained above‚ the fraud was implemented by the former CEO Bernard Ebbers and commited by his financial director Scott D. Sullivan. The technique used by Worldcom was pretty simple; indeed‚ he cooked the books by saving pure operating expenses such as maintenance network in capital expenditure instead of expenses in order to hide its decreasing earnings and to maintain the price of Worldcom’s stock. In summary
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it recommended unnecessary repairs to customers in its automobile service business; Standard Chartered Bank was banned from trading on the Hong Kong stock market after being implicated in an improper share support scheme. The list goes on. In each case‚ employees broke through existing control mechanisms and jeopardized the franchise of the business. The cost to the companies- in damaged reputations‚ fines‚ business losses‚ missed opportunities‚ and diversion of management attention to deal with
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Enron and WorldCom Case Study This report is based on the demise of Enron Corporation and WorldCom. Both the firms are demised due to the ethical lapses. These ethical lapses come into existence when managements of the firm‚ uses unethical practices to accomplish the goals of the firm. Maintaining financial and accounting standards in the business practices are necessary. The profession of accounting has become a mockery due to the accounting scandals that took place all over the world in the
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benefit that involves a capacity or in combination with other assets‚ to contribute directly or indirectly to future net cash inflows‚ a particular entity can obtain the benefit and control others’ access to it and the transaction or other event giving rise to the entity’s right to or control of the benefit has already occurred. Future economic benefit is the essence of an asset (paragraphs 27–31). An asset has the capacity to serve the entity by being exchanged for something else of value to the entity
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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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FAR600 CASE STUDY WORLDCOM QUESTION 1 a) Discuss the earnings management technique employed by the management of World Com. WorldCom admitted that the company had classified over $3.8 billion in payments for line costs as capital expenditures rather than current expenses. Line costs are what WorldCom pays other companies for using their communications networks; they consist principally of access fees and transport charges for messages for WorldCom customers. Reportedly‚ $3
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The Rise and Fall of George Tenet Leshea Hicks Strayer University The Rise and Fall of George Tenet The departure of George Tenet was due to a series of events that included ethical dilemmas while serving as director of the Director of the Central Intelligence Agency. As many questions were raised during his tenure‚ he was used a punching bag and would come out in the end full of regret. In this paper‚ I will discuss the four ethical dilemmas‚ prioritization concerns‚ strategies concerning ethical
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The Rise and Fall of Civilizations Many successful empires in ancient history came to an end at one point. For example‚ the Roman Empire was very successful during the rise and fall of Augustus. Also‚ Ancient Greece which was successful during the rise and fall of Alexander the Great. Augustus and Alexander the Great were both similar in their rise. Augustus became emperor after the assassination of Julius Caesar and Alexander the Great became king after the assassination of his father. They differ
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capitalization of operating expenses • management promoted culture fixed on the numbers • board of directors’ failure to scrutinize billion-dollar acquisitions • excessive loans to executives in order protect stock prices Financial Overview of WorldCom (in Billions) Financial Highlights 1994 1999 2001 2004 Revenues $2.2 $37.1 $35.2 $20.7 Total Assets $3.4 $91.1 $103.9 $17.1 Employees $7.5 $97.6 $87.8 $40.4 Market Cap. $3.3 $150.5 $42.8 $6.4 Debt $0.8 $13.1 $30.0 $5.9 Total Capitalization
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The Rise and Fall of The Third Reich By: William H. Shirer William Shirer‚ the son of a lawyer‚ was born in Chicago in 1904. When he was a child his father died and the family moved to Cedar Rapids‚ Iowa. He had to deliver newspapers and sell eggs to help the family finances. After leaving school he worked on the local newspaper. In 1925 Shirer toured Europe and while in Paris found work with the Chicago Tribune. He started on the copy desk but after learning French‚ German‚ Italian and Spanish
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