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Worldcom financial disaster provided many substantial learning points while helping expose the importance of accuracy and integrity in accounting procedures and standards. Eight years ago, when the true nature of the rise and fall of this telecommunications giant became public, many in the financial sectors of the world demonstrated shock and disbelief at the remarkable scope of corruption seemingly stemming from this agency. The purpose of this essay is to highlight worthwhile lessons of the Worldcom accounting scandal occurring at the early part of this century in an attempt to gain understanding of the temptations, consequences and regulations of the ever changing world of finance and its accounting procedures.
Understanding and defining fraud is helpful in understanding the events of the Worldcom situation. My personal definition of fraud states that fraud is an intentional act to deceive another in order to gain a competitive advantage over that targeted person or group of people. A very competitive, large scale market, such as the telecommunications example in the late 90's, coupled with new technological advances, seemed to combine to allow fraudulent abuses and facilitate those in power to take advantage of the reputation and willingness of the business world. The high paced world of finance and big business creates a situation where ethics and wise judgment is often overlooked. This environment appeared to set the conditions...
Using deceptive techniques requiring intimidation and coercion, the leadership team and its hired accounting firm of Arthur Anderson successfully promoted the company's worth beyond reality. Projecting an image of strength is often a wise tactic however, taken to the extreme, deceit and fraud seem to arise. This lie, which may have started as a slight exaggeration, eventually led to the exposure of the false documentation and forthcoming investigation of the company that would soon prove fraudulent actions by the accounting and leadership departments.
This fraud effected the different parties involved in different ways. The company employees, of not only Worldcom, but of competing companies as well, lost their jobs as labor costs were trimmed to stay competitive as disruptions in the labor forces hold their own powerful effects. Many took the financial statements as the honest truth, and good business decisions based on fraudulent information turned disastrous, causing chaos, doubt and suspicion within the telecommunications world. Creditors were often left in the cold as imaginary money cannot be paid back and it was not. Wall Street eventually…
Worldcom Explain how the fraud triangle applies to the CEO and the Controller The fraud triangle consists of perceived pressure, perceived opportunity and rationalization. With Bernie Ebbers, the opportunity was clear. As CEO, he had the ability to order others in the organization to conduct acts that would result in the fraud, specifically the fake elements of the financial statements. The pressure that Ebbers felt was that most of his wealth was
The first was the motivation on the part of Ebbers and Sullivan. The second was the complicity of employees within WorldCom's accounting department. The third was the complicity of the external auditor, Arthur Andersen. In order to prevent such frauds from occurring, these different factors should be addressed. With respect tot Ebbers and Sullivan, two problems occurred that should be prevented in future. The first is the heavy emphasis on
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
The first three organizations in line to recuperate their funds were Citigroup, J.P. Morgan and General Electric Group. They had been offering financial solutions and encouragement to purchase the WorldCom stock based on a favorable business relationship. However, at the time when bankruptcy procedures were commenced, the three organizations recognized their losses and intended to recuperate them. A succinct presentation of the period surrounding the crisis could be reveled by
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
Fraud Awareness Scholarship Request As a student entering my senior year of accounting studies, I have found that my interests and natural tendencies lie in the field of fraud awareness and prevention. It is my goal to work in fraud prevention once I graduate. With Enron, WorldCom, Adelphia and Tyco all names in common use on the daily news, I feel that being aware of and specializing in fraud prevention is extremely