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.....pressures that lead executives and managers to "cook the books?"Although a company's profitability is ultimately only demonstrated in the long-term, short-term perceptions can affect the price of a company's stock which can in turn threaten its ability to thrive in the future. WorldCom was part of the highly competitive telecommunications industry and the desire to show that it was more profitable than its competitors as well as the fact that it needed to show that its recent mergers has been financially worthwhile (a difficult task that can take many years to do) fueled corruption at the company.
What is the boundary between earnings smoothings and or earnings management and fraudulent reporting?
Certain aspects of GAAP (generally accepted accounting principles) actually worked in favor of WorldCom's desire to make the company seem more profitable than it actually was; for example, line costs had to be estimated as profit given that they were not paid until several months afterward (Kaplan & Kiron, 2007, p.4). Transferring line costs and misstating them as capital expenditures further distorted profits (Kaplan & Kiron, 2007, p.7). But while certain practices which may result in inflation of profits may be acceptable, even necessary, this fact should...
The actions of WorldCom were clearly designed to distort the public's perceptions of the company's profits, not merely to comply with existing regulations. Even when the law allows figures to be reported in a particular manner, if it causes distorted perceptions of profitability, this should be noted in the company's report. WorldCom also withheld documents and altered records, neither of which were caught in the original audits of the company by Arthur Anderson.
Why were the actions of 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?
WorldCom repeatedly denied its accounting firm Arthur Anderson the ability to access its computerized general ledger. Its corporate structure was also designed to minimize the ability of company employees to contact outside directors if they had concerns about accounting irregularities (Kaplan & Kiron, 2007, p.11). Anderson clearly contributed to the extent to which WorldCom's fraud was perpetuated by focusing…
DELL INC. FRAUD Business practices came under fire when America's seventh largest firm Enron collapsed due to unethical accounting strategies. This case triggered a series of unwelcome events where one after the other, large organizations in the U.S. collapsed or run for bankruptcy cover with one case even implicated the infamous Martha Stewart for insider trading. The various deceitful activities of some larger companies resulted in widespread public mistrust of business
Accounting Ethics Ethics of Accounting There have been breaches in the ethics of accounting in recent times. With that in mind, evaluate whether or not the current trend in the regulation of business establishments is favorable to ethical behavior. Supply supportive evidence to your answers (Jeter, 2003). The generally accepted principles of accounting and the standards of auditing in contemporary practice stipulate that the financial statements of any establishment should contain the following
Law Is Likely to Affect All of the Following: Audit Committees of Public Company Boards of Directors According to Sections 201 and 204 of the Sarbanes-Oxley Act (SOX), auditors must report "all critical accounting policies and practices" and the members of an audit committee cannot offer "non-audit services for public company audit clients" (PowerPoint, slide 6). According to SOX Section 303 and 404, company officers are prohibited from influencing auditors
WorldCom: The Ethics of Whistle-Blowing In recent years, it has not been easy for employees to completely trust the corporations for which they work. Accounting scandals have made the average employee question business practices unlike before. The large corporate American framework built in culture; vision, core values, accountability and self-worth seem to have gone out the window with a certain degree of worry. Is it risky to work for a big
cross examine the accounting fraud scandal that took place at Xerox, the main intention of this analysis is to know the causes and the effects of the scandal as well as the need of a good practice in business ethics, corporate management and the general oversight. Xerox was able to utilize a creative technique of accounting to give false presentation of its assets and liabilities, they also deceive the
WorldCom Prior to the corporate financial scandal, WorldCom was one of the largest long distance telephone companies (Reuters, 2003). Initially headquartered in Mississippi it later moved to Virginia. The company grew fast by acquiring other companies such as MCI Communications in 1998 and UUNET technology in 1996. Other companies acquired included, Metromedia in 1992, Resurgens Communications Group in 1993. In the course of this acquisition spree, WorldCom undertook two complex