WorldCom Cases, Essay Example

What did the Chief Executive Officer Ebbers cause subordinates to improperly manipulate? (Refers to complaint 19301)

When CEO Ebbers decided to leave WorldCom, he still engaged in business with WorldCom senior managers and executes that were also in on the fraudulent schemes to conceal the true operational and financial results of World. In the WorldCom case, CEO Ebbers, reportedly caused subordinates to improperly manipulated WorldCom’s reported revenue, selling, general and administrative expenses, line cost expenses, net income earnings per share (EPS), and earnings before interest, taxes, depreciation and amortization. (WorldCom Complaint 19301)
2. If you are the subordinate of Mr. Ebbers, will you comply with Mr. Ebbers? If not, define what you would do to avoid termination. If yes, provide justification. (Complaint 19301)

As a subordinate during Ebbers time, you would likely follow along. Most of the orders came from Sullivan, and in the interest of keeping your job did what the superior instructed to do. Sullivan and subordinates believed that the numbers reported were only short term and that they would report to accounting real numbers once the profits bounced back. Ebbers would sell his subordinates with a lot of dreams. During the boom of telecommunications during the late 90s and early 2000s, there was a lot of money coming in, due to the strong Internet demand.
3. What is the improper Accounting Scheme WorldCom engaged in? (Complaint 17588)

In 2001, WorldCom decided to improperly engage in an Accounting scheme that intended to manipulate WorldCom’s earnings to support the stock price and keep them the same as the expectations of Wall Street. In the accounting scheme WorldCom misrepresented its financial results by underreporting its expenses and overstated its earnings when it filed with the Commission at the fiscal year end of December 2001 till March 2002.
4. What is the total amount of accounting fraud in 2001? (Complaint 17588)

Per the Complaint 175888, the total amount in which WorldCom committed in the accounting scheme fraud was 2001 line of costs totaled $17.794 billion and it suffered a loss of $662 million. It reported line of costs at $14.739 billion, and earnings and minority interest at $2.393 billion. A vast difference from actual numbers.
5. Cynthia Cooper is known as the mother of 404 and the whistleblower in the WorldCom Scandal, discuss her view of Internal Control. (Complaint 10590507)

Cynthia probably experienced feelings that most in the accounting department felt, curiosity, discomfort, and finally suspicion. Following her gut and going to the chain command, she finally got the information she was searching for. Her perspective of internal control (audit), is that it represents a conflict of interest. Whereas the corporate world is at ease with audits being in-house as they still pick up their paychecks from the boss. The passage of Sarbanes Oxley has narrowed the scope of internal audits to not be able to perform risk based audits. For internal audits to function properly they must report to an audit committee. Section 404 has helped corporations such as WorldCom commit collusion where they can bypass, controls of audits. Fraud will continue to happen in companies, but is important that corporations instill a strong internal-control framework.

Works Cited

Katz, David, Homer, Julia. “WorldCom Whistle-Blower Cynthia Cooper. CFO Magazine. 1 Feb. 2008. Web. 10 Nov. 2013. http://www.cfo.com/printable/article.cfm/10590507 “WorldCom Complaint 10590507”

WorldCom Complaint 19301. SEC. 2005. Web. 10 Nov. 2013. http://www.sec.gov/litigation/complaints/comp19301.pdf

WorldCom Complaint 17588. SEC. 2002. Web. 10 Nov. 2013. http://www.sec.gov/litigation/complaints/complr17588.htm