SlideShare ist ein Scribd-Unternehmen logo
1 von 17
CASE STUDY
SECTION C
GROUP 1

Business Ethics
Accounting Fraud at WorldCom:
A case study
What is/ are the Business Ethics
Issues in this Case?








How did they reach here?
Who was/were/are responsible?
When did it occur?
When did it come to light?
Which of the Ethics Principles
compromised/flouted?
Where do we go from here? Solutions?
Overview











WorldCom Inc. began as a small
Mississippi provider of long
distance telephone service called LDDS.
1996: Acquired MFS Communications (internet
backbone)
1998: Acquired MCI
2000: Failed merger with Sprint
2000: Dotcom Bubble Burst (rapid decline in
telecom stock values)
2002: Accounting Fraud uncovered
2002: Filed for Bankruptcy Protection
The Key Players

Source: IIT Kharaghpur
What Happened?


From 1998-2000, WorldCom reduced reserve
accounts held to cover liabilities of acquired
companies








Reserves didn‟t cut it; An e-mail was sent in
December 2000 to a division in Texas directing
misclassification of expenses.
CFO told key staff members to mark operating
costs as long-term investments to the tune of $3.85
billion.
Huge losses turned into enormous profits.




WorldCom added $2.8 billion to the revenue line from
these reserves

$1.38 billion in net income in 2001

Inflated the company‟s value in its assets






The whistleblower sent
tips to the internal
audit team
Accounting
irregularities were
spotted in MCI's
books.
The SEC was
suspicious because
while WorldCom was
making so much
profit, AT&T was losing







Capital expenditures
as well as the $500
million in
undocumented
computer expenses.
Another $2 billion in
questionable entries
Admitted to inflating
its profits by $3.8
billion over the
previous five
Why it Happened?


Corporate Culture












Autocratic style of management and followed a top down
approach.

Ebbers was obsessed with revenue growth and
insisted on a 42% E/R ratio.
Lack of courage of employees to communicate the
fraudulent activates – believed it would have cost
them their jobs
A financial system in which controls were extremely
deficient
The BOD and Audit Committee did not appear to have
had an adequate understanding of the company and
culture
Inadequate audits by independent auditors
Why „good‟ managers make bad ethical
choices
10

Four Rationalizations To Justify Questionable Conduct
1)

2)

Belief that the activity is not “really” illegal.
Belief that it is in the individual’s or corporation’s best
interest.

3)

Belief that it will never be found out.

4)

Belief that the company will condone actions that are taken in
its interest and will even protect the managers responsible.
Key Take Aways
11











History repeats itself.
Be aware of your environment.
If it seems too good to be
true, it probably is.
No job is worth breaking the law
or committing unethical acts for.
Your personal integrity is your most important
asset – you own it and control it.
“Trust, but Verify”.
Ethical Values Violated








Unethical Work Culture
Pressurising employees to manipulate
accounts
No productive outlet for employee dissent
Employees who played along were rewarded;
others were threatened.
Fudged up the accounts; mislead the various
stakeholders
Corporate Whistleblowing
 Cynthia Cooper and her team were the first people who
uncovered the major fraud at Worldcom.
 The voluntary release of non-public information, as a moral
protest, by a member or former member of an organization
outside the normal channels of communication to an appropriate
audience about illegal and/or immoral conduct in the organization
or conduct in the organization that is opposed in some significant
way to the public interest.
 Traditional corporate monitoring occurs through a variety of
overlapping means, including: the company‟s board of directors,
external auditors and attorneys, and the government.
 “The highest good was the good will. To act from a good will is to
act form duty. Thus, it is the intention behind an action rather than
its consequences that make that action good” – Immanuel Kant.
 As businesses continue to grow larger and more complex,
whistleblowing has emerged as a valuable tool for eliminating
future corporate fraud.
 A reported 90 per cent of whistleblowers lose their jobs or are
demoted.
What the Group Recommends









Inculcation of ethical values into the work culture
Embracing a bottom top approach
Stringent auditing, both internal and external,
procedures
Divesting control in a larger number of hands
Comparing companies in the same industry and
sector based on performance indicators
Keeping various stakeholders‟ interests in mind.
Bibliography




Kaplan, R. S., and Kiron., D. (2007) Accounting Fraud at WorldCom. Harvard Business
School Case 104-071, September 2007. (Revised from original April 2004 version.)
Lyke, B. (2002). “WorldCom: The Accounting Scandal.” CRS Report for Congress, August
2002.http://www.law.umaryland.edu/marshall/crsreports/crsdocuments/RS21253_0829200
2.pdf



Romar, E., and Calkins, M. (2006) WorldCom Case Study Update. University o
Massachusetts-Boston http://www.scu.edu/ethics/dialogue/candc/cases/worldcomupdate.html



American Institute of Certified Public Accountants (2005) The Worldcom Fraud
http://www.aicpa.org/InterestAreas/AccountingEducation/Resources/DownloadableDocum
ents/worldcom.ppt



WorldCom: The Case Against Bernard Ebbers
(2011)https://www.youtube.com/watch?v=DW03eVMtOY4



WorldCom – What Went Wrong (2008)https://www.youtube.com/watch?v=7g_d-phoUrU
Bibliography


Bernard Ebbers Photo :
http://www.time.com/time/specials/packages/article/0,28804,1903155_1903156
_1903277,00.html



Scott Sullivan Photo: http://www.guardian.co.uk/pictures/image/0,,1070329609307,00.html



Buford Yates Photo:
http://news.bbc.co.uk/2/hi/business/2307845.stm



David Myers: http://www.bloomberg.com/news/2012-06-21/obama-stimulusaids-worldcom-felon-with-health-care-loan.html



Betty Vinson Photo: http://www.deseretnews.com/article/600153804/2-workerssentenced-in-WorldCom-scandal.html?pg=all



Troy Normand Photo: http://www.deseretnews.com/article/600153804/2workers-sentenced-in-WorldCom-scandal.html?pg=all
THE END

Weitere ähnliche Inhalte

Was ist angesagt?

WorldCom Scandal
WorldCom ScandalWorldCom Scandal
WorldCom ScandalUmer Awan
 
Analysis of Worldcom Scandal
Analysis of Worldcom ScandalAnalysis of Worldcom Scandal
Analysis of Worldcom ScandalKamuran Koçak
 
38299644 tyco-fraud-case-study-1
38299644 tyco-fraud-case-study-138299644 tyco-fraud-case-study-1
38299644 tyco-fraud-case-study-1Nantha Kumaran
 
1. waste managment scandle 1998
1. waste managment scandle 19981. waste managment scandle 1998
1. waste managment scandle 1998ShabbirAnjum1
 
How Unethical Practices Almost Destroyed WorldCom
How Unethical Practices Almost Destroyed WorldComHow Unethical Practices Almost Destroyed WorldCom
How Unethical Practices Almost Destroyed WorldComRavindra Kumar
 
Worldcom,Enron,largest bankruptcy,how worldcom,SOA
Worldcom,Enron,largest bankruptcy,how worldcom,SOAWorldcom,Enron,largest bankruptcy,how worldcom,SOA
Worldcom,Enron,largest bankruptcy,how worldcom,SOAAdvance Business Consulting
 
Worldcom scam 2002
Worldcom scam 2002Worldcom scam 2002
Worldcom scam 2002Sanket Jha
 
World com || Auditing and Corporate Governance
World com || Auditing and Corporate Governance World com || Auditing and Corporate Governance
World com || Auditing and Corporate Governance Mohit Chhabra
 
World com corporate governance failure
World com   corporate governance failureWorld com   corporate governance failure
World com corporate governance failuremanojsedai2
 
Worldcom failure 1
Worldcom failure 1Worldcom failure 1
Worldcom failure 1Dilbarjan
 
Arthur andersen collapse
Arthur andersen collapseArthur andersen collapse
Arthur andersen collapsePurnima Meena
 
Corporate Governance at Martha Stewart Living Omnimedia
Corporate Governance at Martha Stewart Living OmnimediaCorporate Governance at Martha Stewart Living Omnimedia
Corporate Governance at Martha Stewart Living OmnimediaRohan Bharaj
 
Parmalat scandal-by abhishek yadav
Parmalat scandal-by abhishek yadavParmalat scandal-by abhishek yadav
Parmalat scandal-by abhishek yadavAbhishek Yadav
 
World com scandal Effects on world
World com scandal Effects on worldWorld com scandal Effects on world
World com scandal Effects on worldUmer Awan
 

Was ist angesagt? (20)

WorldCom Scandal
WorldCom ScandalWorldCom Scandal
WorldCom Scandal
 
wrld com ppt
wrld com pptwrld com ppt
wrld com ppt
 
Analysis of Worldcom Scandal
Analysis of Worldcom ScandalAnalysis of Worldcom Scandal
Analysis of Worldcom Scandal
 
38299644 tyco-fraud-case-study-1
38299644 tyco-fraud-case-study-138299644 tyco-fraud-case-study-1
38299644 tyco-fraud-case-study-1
 
WorldCom Scandal
WorldCom ScandalWorldCom Scandal
WorldCom Scandal
 
1. waste managment scandle 1998
1. waste managment scandle 19981. waste managment scandle 1998
1. waste managment scandle 1998
 
How Unethical Practices Almost Destroyed WorldCom
How Unethical Practices Almost Destroyed WorldComHow Unethical Practices Almost Destroyed WorldCom
How Unethical Practices Almost Destroyed WorldCom
 
Worldcom,Enron,largest bankruptcy,how worldcom,SOA
Worldcom,Enron,largest bankruptcy,how worldcom,SOAWorldcom,Enron,largest bankruptcy,how worldcom,SOA
Worldcom,Enron,largest bankruptcy,how worldcom,SOA
 
Worldcom scam 2002
Worldcom scam 2002Worldcom scam 2002
Worldcom scam 2002
 
Worldcom
WorldcomWorldcom
Worldcom
 
World com || Auditing and Corporate Governance
World com || Auditing and Corporate Governance World com || Auditing and Corporate Governance
World com || Auditing and Corporate Governance
 
World com corporate governance failure
World com   corporate governance failureWorld com   corporate governance failure
World com corporate governance failure
 
Worldcom failure 1
Worldcom failure 1Worldcom failure 1
Worldcom failure 1
 
The worldcom scandal
The worldcom scandalThe worldcom scandal
The worldcom scandal
 
Arthur andersen collapse
Arthur andersen collapseArthur andersen collapse
Arthur andersen collapse
 
Corporate Governance at Martha Stewart Living Omnimedia
Corporate Governance at Martha Stewart Living OmnimediaCorporate Governance at Martha Stewart Living Omnimedia
Corporate Governance at Martha Stewart Living Omnimedia
 
MCI Case Study
MCI Case StudyMCI Case Study
MCI Case Study
 
Parmalat scandal-by abhishek yadav
Parmalat scandal-by abhishek yadavParmalat scandal-by abhishek yadav
Parmalat scandal-by abhishek yadav
 
Tyco Scam
Tyco ScamTyco Scam
Tyco Scam
 
World com scandal Effects on world
World com scandal Effects on worldWorld com scandal Effects on world
World com scandal Effects on world
 

Ähnlich wie Accounting fraud at Worldcom

Class Lecture: Corporate Culture, Abuse of Power, Whistleblowing and Ethics
Class Lecture: Corporate Culture, Abuse of Power, Whistleblowing and EthicsClass Lecture: Corporate Culture, Abuse of Power, Whistleblowing and Ethics
Class Lecture: Corporate Culture, Abuse of Power, Whistleblowing and EthicsJohn J. Sarno
 
Chapter 12 Duties as a WhistleblowerWhistleblowerA whis.docx
Chapter 12 Duties as a WhistleblowerWhistleblowerA whis.docxChapter 12 Duties as a WhistleblowerWhistleblowerA whis.docx
Chapter 12 Duties as a WhistleblowerWhistleblowerA whis.docxcravennichole326
 
Week 5ACC 290 Week 5 DQ1(What is the Control Environment).docx.docx
Week 5ACC 290 Week 5 DQ1(What is the Control Environment).docx.docxWeek 5ACC 290 Week 5 DQ1(What is the Control Environment).docx.docx
Week 5ACC 290 Week 5 DQ1(What is the Control Environment).docx.docxmelbruce90096
 
Corruption Risks Update 2009
Corruption Risks Update 2009Corruption Risks Update 2009
Corruption Risks Update 2009Stephen_Horne
 
Fraud Awareness For Managers
Fraud Awareness For ManagersFraud Awareness For Managers
Fraud Awareness For Managersrickycfe
 
Introduction to the corporate governance
Introduction to the corporate governanceIntroduction to the corporate governance
Introduction to the corporate governanceRehanshk
 
2010 - A New Decade... New Directions? Or More of the Same
2010 - A New Decade... New Directions? Or More of the Same2010 - A New Decade... New Directions? Or More of the Same
2010 - A New Decade... New Directions? Or More of the SameSwenson Advisors, LLP
 
International accounting scandals
International accounting scandalsInternational accounting scandals
International accounting scandalsFelix Otoo
 
ETH–1Marketing Ethics Prepared and written by Dr. Linda.docx
ETH–1Marketing Ethics Prepared and written by Dr. Linda.docxETH–1Marketing Ethics Prepared and written by Dr. Linda.docx
ETH–1Marketing Ethics Prepared and written by Dr. Linda.docxSANSKAR20
 
Ethics and-internal-auditing published
Ethics and-internal-auditing publishedEthics and-internal-auditing published
Ethics and-internal-auditing publishedsavassociates1
 
Discus the development of the fraud examinerforensic accounting pro.pdf
Discus the development of the fraud examinerforensic accounting pro.pdfDiscus the development of the fraud examinerforensic accounting pro.pdf
Discus the development of the fraud examinerforensic accounting pro.pdfMALASADHNANI
 
Ethics in AccountingKeys to Reducing FraudAbstra.docx
Ethics in AccountingKeys to Reducing FraudAbstra.docxEthics in AccountingKeys to Reducing FraudAbstra.docx
Ethics in AccountingKeys to Reducing FraudAbstra.docxhumphrieskalyn
 

Ähnlich wie Accounting fraud at Worldcom (20)

Case 13 Essay
Case 13 EssayCase 13 Essay
Case 13 Essay
 
Class Lecture: Corporate Culture, Abuse of Power, Whistleblowing and Ethics
Class Lecture: Corporate Culture, Abuse of Power, Whistleblowing and EthicsClass Lecture: Corporate Culture, Abuse of Power, Whistleblowing and Ethics
Class Lecture: Corporate Culture, Abuse of Power, Whistleblowing and Ethics
 
Chapter 12 Duties as a WhistleblowerWhistleblowerA whis.docx
Chapter 12 Duties as a WhistleblowerWhistleblowerA whis.docxChapter 12 Duties as a WhistleblowerWhistleblowerA whis.docx
Chapter 12 Duties as a WhistleblowerWhistleblowerA whis.docx
 
Week 5ACC 290 Week 5 DQ1(What is the Control Environment).docx.docx
Week 5ACC 290 Week 5 DQ1(What is the Control Environment).docx.docxWeek 5ACC 290 Week 5 DQ1(What is the Control Environment).docx.docx
Week 5ACC 290 Week 5 DQ1(What is the Control Environment).docx.docx
 
Corruption Risks Update 2009
Corruption Risks Update 2009Corruption Risks Update 2009
Corruption Risks Update 2009
 
Fraud Awareness For Managers
Fraud Awareness For ManagersFraud Awareness For Managers
Fraud Awareness For Managers
 
Introduction to the corporate governance
Introduction to the corporate governanceIntroduction to the corporate governance
Introduction to the corporate governance
 
2010 - A New Decade... New Directions? Or More of the Same
2010 - A New Decade... New Directions? Or More of the Same2010 - A New Decade... New Directions? Or More of the Same
2010 - A New Decade... New Directions? Or More of the Same
 
CORPORATE GOVERNANCE AND ETHICS
CORPORATE GOVERNANCE AND ETHICSCORPORATE GOVERNANCE AND ETHICS
CORPORATE GOVERNANCE AND ETHICS
 
Converging ethics, governance, and culture
Converging ethics, governance, and cultureConverging ethics, governance, and culture
Converging ethics, governance, and culture
 
Hollatecasestudy
HollatecasestudyHollatecasestudy
Hollatecasestudy
 
2. internal control
2. internal control2. internal control
2. internal control
 
International accounting scandals
International accounting scandalsInternational accounting scandals
International accounting scandals
 
ETH–1Marketing Ethics Prepared and written by Dr. Linda.docx
ETH–1Marketing Ethics Prepared and written by Dr. Linda.docxETH–1Marketing Ethics Prepared and written by Dr. Linda.docx
ETH–1Marketing Ethics Prepared and written by Dr. Linda.docx
 
Ethics and-internal-auditing published
Ethics and-internal-auditing publishedEthics and-internal-auditing published
Ethics and-internal-auditing published
 
Acc assignment 1
Acc assignment 1Acc assignment 1
Acc assignment 1
 
Discus the development of the fraud examinerforensic accounting pro.pdf
Discus the development of the fraud examinerforensic accounting pro.pdfDiscus the development of the fraud examinerforensic accounting pro.pdf
Discus the development of the fraud examinerforensic accounting pro.pdf
 
Business Ethics Paper
Business Ethics PaperBusiness Ethics Paper
Business Ethics Paper
 
Ethics in AccountingKeys to Reducing FraudAbstra.docx
Ethics in AccountingKeys to Reducing FraudAbstra.docxEthics in AccountingKeys to Reducing FraudAbstra.docx
Ethics in AccountingKeys to Reducing FraudAbstra.docx
 
Legal services innovation
Legal services innovationLegal services innovation
Legal services innovation
 

Kürzlich hochgeladen

Call Girls Electronic City Just Call 👗 7737669865 👗 Top Class Call Girl Servi...
Call Girls Electronic City Just Call 👗 7737669865 👗 Top Class Call Girl Servi...Call Girls Electronic City Just Call 👗 7737669865 👗 Top Class Call Girl Servi...
Call Girls Electronic City Just Call 👗 7737669865 👗 Top Class Call Girl Servi...amitlee9823
 
How to Get Started in Social Media for Art League City
How to Get Started in Social Media for Art League CityHow to Get Started in Social Media for Art League City
How to Get Started in Social Media for Art League CityEric T. Tung
 
Call Girls Service In Old Town Dubai ((0551707352)) Old Town Dubai Call Girl ...
Call Girls Service In Old Town Dubai ((0551707352)) Old Town Dubai Call Girl ...Call Girls Service In Old Town Dubai ((0551707352)) Old Town Dubai Call Girl ...
Call Girls Service In Old Town Dubai ((0551707352)) Old Town Dubai Call Girl ...allensay1
 
PHX May 2024 Corporate Presentation Final
PHX May 2024 Corporate Presentation FinalPHX May 2024 Corporate Presentation Final
PHX May 2024 Corporate Presentation FinalPanhandleOilandGas
 
Russian Call Girls In Rajiv Chowk Gurgaon ❤️8448577510 ⊹Best Escorts Service ...
Russian Call Girls In Rajiv Chowk Gurgaon ❤️8448577510 ⊹Best Escorts Service ...Russian Call Girls In Rajiv Chowk Gurgaon ❤️8448577510 ⊹Best Escorts Service ...
Russian Call Girls In Rajiv Chowk Gurgaon ❤️8448577510 ⊹Best Escorts Service ...lizamodels9
 
Call Girls In Noida 959961⊹3876 Independent Escort Service Noida
Call Girls In Noida 959961⊹3876 Independent Escort Service NoidaCall Girls In Noida 959961⊹3876 Independent Escort Service Noida
Call Girls In Noida 959961⊹3876 Independent Escort Service Noidadlhescort
 
Falcon Invoice Discounting: Empowering Your Business Growth
Falcon Invoice Discounting: Empowering Your Business GrowthFalcon Invoice Discounting: Empowering Your Business Growth
Falcon Invoice Discounting: Empowering Your Business GrowthFalcon investment
 
Eluru Call Girls Service ☎ ️93326-06886 ❤️‍🔥 Enjoy 24/7 Escort Service
Eluru Call Girls Service ☎ ️93326-06886 ❤️‍🔥 Enjoy 24/7 Escort ServiceEluru Call Girls Service ☎ ️93326-06886 ❤️‍🔥 Enjoy 24/7 Escort Service
Eluru Call Girls Service ☎ ️93326-06886 ❤️‍🔥 Enjoy 24/7 Escort ServiceDamini Dixit
 
Business Model Canvas (BMC)- A new venture concept
Business Model Canvas (BMC)-  A new venture conceptBusiness Model Canvas (BMC)-  A new venture concept
Business Model Canvas (BMC)- A new venture conceptP&CO
 
👉Chandigarh Call Girls 👉9878799926👉Just Call👉Chandigarh Call Girl In Chandiga...
👉Chandigarh Call Girls 👉9878799926👉Just Call👉Chandigarh Call Girl In Chandiga...👉Chandigarh Call Girls 👉9878799926👉Just Call👉Chandigarh Call Girl In Chandiga...
👉Chandigarh Call Girls 👉9878799926👉Just Call👉Chandigarh Call Girl In Chandiga...rajveerescorts2022
 
Famous Olympic Siblings from the 21st Century
Famous Olympic Siblings from the 21st CenturyFamous Olympic Siblings from the 21st Century
Famous Olympic Siblings from the 21st Centuryrwgiffor
 
FULL ENJOY Call Girls In Mahipalpur Delhi Contact Us 8377877756
FULL ENJOY Call Girls In Mahipalpur Delhi Contact Us 8377877756FULL ENJOY Call Girls In Mahipalpur Delhi Contact Us 8377877756
FULL ENJOY Call Girls In Mahipalpur Delhi Contact Us 8377877756dollysharma2066
 
Organizational Transformation Lead with Culture
Organizational Transformation Lead with CultureOrganizational Transformation Lead with Culture
Organizational Transformation Lead with CultureSeta Wicaksana
 
Marel Q1 2024 Investor Presentation from May 8, 2024
Marel Q1 2024 Investor Presentation from May 8, 2024Marel Q1 2024 Investor Presentation from May 8, 2024
Marel Q1 2024 Investor Presentation from May 8, 2024Marel
 
The Abortion pills for sale in Qatar@Doha [+27737758557] []Deira Dubai Kuwait
The Abortion pills for sale in Qatar@Doha [+27737758557] []Deira Dubai KuwaitThe Abortion pills for sale in Qatar@Doha [+27737758557] []Deira Dubai Kuwait
The Abortion pills for sale in Qatar@Doha [+27737758557] []Deira Dubai Kuwaitdaisycvs
 
Mysore Call Girls 8617370543 WhatsApp Number 24x7 Best Services
Mysore Call Girls 8617370543 WhatsApp Number 24x7 Best ServicesMysore Call Girls 8617370543 WhatsApp Number 24x7 Best Services
Mysore Call Girls 8617370543 WhatsApp Number 24x7 Best ServicesDipal Arora
 
Nelamangala Call Girls: 🍓 7737669865 🍓 High Profile Model Escorts | Bangalore...
Nelamangala Call Girls: 🍓 7737669865 🍓 High Profile Model Escorts | Bangalore...Nelamangala Call Girls: 🍓 7737669865 🍓 High Profile Model Escorts | Bangalore...
Nelamangala Call Girls: 🍓 7737669865 🍓 High Profile Model Escorts | Bangalore...amitlee9823
 
Phases of Negotiation .pptx
 Phases of Negotiation .pptx Phases of Negotiation .pptx
Phases of Negotiation .pptxnandhinijagan9867
 

Kürzlich hochgeladen (20)

Call Girls Electronic City Just Call 👗 7737669865 👗 Top Class Call Girl Servi...
Call Girls Electronic City Just Call 👗 7737669865 👗 Top Class Call Girl Servi...Call Girls Electronic City Just Call 👗 7737669865 👗 Top Class Call Girl Servi...
Call Girls Electronic City Just Call 👗 7737669865 👗 Top Class Call Girl Servi...
 
How to Get Started in Social Media for Art League City
How to Get Started in Social Media for Art League CityHow to Get Started in Social Media for Art League City
How to Get Started in Social Media for Art League City
 
Call Girls Service In Old Town Dubai ((0551707352)) Old Town Dubai Call Girl ...
Call Girls Service In Old Town Dubai ((0551707352)) Old Town Dubai Call Girl ...Call Girls Service In Old Town Dubai ((0551707352)) Old Town Dubai Call Girl ...
Call Girls Service In Old Town Dubai ((0551707352)) Old Town Dubai Call Girl ...
 
PHX May 2024 Corporate Presentation Final
PHX May 2024 Corporate Presentation FinalPHX May 2024 Corporate Presentation Final
PHX May 2024 Corporate Presentation Final
 
Russian Call Girls In Rajiv Chowk Gurgaon ❤️8448577510 ⊹Best Escorts Service ...
Russian Call Girls In Rajiv Chowk Gurgaon ❤️8448577510 ⊹Best Escorts Service ...Russian Call Girls In Rajiv Chowk Gurgaon ❤️8448577510 ⊹Best Escorts Service ...
Russian Call Girls In Rajiv Chowk Gurgaon ❤️8448577510 ⊹Best Escorts Service ...
 
Call Girls In Noida 959961⊹3876 Independent Escort Service Noida
Call Girls In Noida 959961⊹3876 Independent Escort Service NoidaCall Girls In Noida 959961⊹3876 Independent Escort Service Noida
Call Girls In Noida 959961⊹3876 Independent Escort Service Noida
 
Falcon Invoice Discounting: Empowering Your Business Growth
Falcon Invoice Discounting: Empowering Your Business GrowthFalcon Invoice Discounting: Empowering Your Business Growth
Falcon Invoice Discounting: Empowering Your Business Growth
 
Eluru Call Girls Service ☎ ️93326-06886 ❤️‍🔥 Enjoy 24/7 Escort Service
Eluru Call Girls Service ☎ ️93326-06886 ❤️‍🔥 Enjoy 24/7 Escort ServiceEluru Call Girls Service ☎ ️93326-06886 ❤️‍🔥 Enjoy 24/7 Escort Service
Eluru Call Girls Service ☎ ️93326-06886 ❤️‍🔥 Enjoy 24/7 Escort Service
 
Business Model Canvas (BMC)- A new venture concept
Business Model Canvas (BMC)-  A new venture conceptBusiness Model Canvas (BMC)-  A new venture concept
Business Model Canvas (BMC)- A new venture concept
 
👉Chandigarh Call Girls 👉9878799926👉Just Call👉Chandigarh Call Girl In Chandiga...
👉Chandigarh Call Girls 👉9878799926👉Just Call👉Chandigarh Call Girl In Chandiga...👉Chandigarh Call Girls 👉9878799926👉Just Call👉Chandigarh Call Girl In Chandiga...
👉Chandigarh Call Girls 👉9878799926👉Just Call👉Chandigarh Call Girl In Chandiga...
 
Famous Olympic Siblings from the 21st Century
Famous Olympic Siblings from the 21st CenturyFamous Olympic Siblings from the 21st Century
Famous Olympic Siblings from the 21st Century
 
FULL ENJOY Call Girls In Mahipalpur Delhi Contact Us 8377877756
FULL ENJOY Call Girls In Mahipalpur Delhi Contact Us 8377877756FULL ENJOY Call Girls In Mahipalpur Delhi Contact Us 8377877756
FULL ENJOY Call Girls In Mahipalpur Delhi Contact Us 8377877756
 
Organizational Transformation Lead with Culture
Organizational Transformation Lead with CultureOrganizational Transformation Lead with Culture
Organizational Transformation Lead with Culture
 
Marel Q1 2024 Investor Presentation from May 8, 2024
Marel Q1 2024 Investor Presentation from May 8, 2024Marel Q1 2024 Investor Presentation from May 8, 2024
Marel Q1 2024 Investor Presentation from May 8, 2024
 
The Abortion pills for sale in Qatar@Doha [+27737758557] []Deira Dubai Kuwait
The Abortion pills for sale in Qatar@Doha [+27737758557] []Deira Dubai KuwaitThe Abortion pills for sale in Qatar@Doha [+27737758557] []Deira Dubai Kuwait
The Abortion pills for sale in Qatar@Doha [+27737758557] []Deira Dubai Kuwait
 
(Anamika) VIP Call Girls Napur Call Now 8617697112 Napur Escorts 24x7
(Anamika) VIP Call Girls Napur Call Now 8617697112 Napur Escorts 24x7(Anamika) VIP Call Girls Napur Call Now 8617697112 Napur Escorts 24x7
(Anamika) VIP Call Girls Napur Call Now 8617697112 Napur Escorts 24x7
 
Mysore Call Girls 8617370543 WhatsApp Number 24x7 Best Services
Mysore Call Girls 8617370543 WhatsApp Number 24x7 Best ServicesMysore Call Girls 8617370543 WhatsApp Number 24x7 Best Services
Mysore Call Girls 8617370543 WhatsApp Number 24x7 Best Services
 
Nelamangala Call Girls: 🍓 7737669865 🍓 High Profile Model Escorts | Bangalore...
Nelamangala Call Girls: 🍓 7737669865 🍓 High Profile Model Escorts | Bangalore...Nelamangala Call Girls: 🍓 7737669865 🍓 High Profile Model Escorts | Bangalore...
Nelamangala Call Girls: 🍓 7737669865 🍓 High Profile Model Escorts | Bangalore...
 
Phases of Negotiation .pptx
 Phases of Negotiation .pptx Phases of Negotiation .pptx
Phases of Negotiation .pptx
 
Falcon Invoice Discounting platform in india
Falcon Invoice Discounting platform in indiaFalcon Invoice Discounting platform in india
Falcon Invoice Discounting platform in india
 

Accounting fraud at Worldcom

  • 1. CASE STUDY SECTION C GROUP 1 Business Ethics Accounting Fraud at WorldCom: A case study
  • 2. What is/ are the Business Ethics Issues in this Case?       How did they reach here? Who was/were/are responsible? When did it occur? When did it come to light? Which of the Ethics Principles compromised/flouted? Where do we go from here? Solutions?
  • 3. Overview        WorldCom Inc. began as a small Mississippi provider of long distance telephone service called LDDS. 1996: Acquired MFS Communications (internet backbone) 1998: Acquired MCI 2000: Failed merger with Sprint 2000: Dotcom Bubble Burst (rapid decline in telecom stock values) 2002: Accounting Fraud uncovered 2002: Filed for Bankruptcy Protection
  • 4. The Key Players Source: IIT Kharaghpur
  • 5. What Happened?  From 1998-2000, WorldCom reduced reserve accounts held to cover liabilities of acquired companies     Reserves didn‟t cut it; An e-mail was sent in December 2000 to a division in Texas directing misclassification of expenses. CFO told key staff members to mark operating costs as long-term investments to the tune of $3.85 billion. Huge losses turned into enormous profits.   WorldCom added $2.8 billion to the revenue line from these reserves $1.38 billion in net income in 2001 Inflated the company‟s value in its assets
  • 6.    The whistleblower sent tips to the internal audit team Accounting irregularities were spotted in MCI's books. The SEC was suspicious because while WorldCom was making so much profit, AT&T was losing    Capital expenditures as well as the $500 million in undocumented computer expenses. Another $2 billion in questionable entries Admitted to inflating its profits by $3.8 billion over the previous five
  • 7.
  • 8. Why it Happened?  Corporate Culture       Autocratic style of management and followed a top down approach. Ebbers was obsessed with revenue growth and insisted on a 42% E/R ratio. Lack of courage of employees to communicate the fraudulent activates – believed it would have cost them their jobs A financial system in which controls were extremely deficient The BOD and Audit Committee did not appear to have had an adequate understanding of the company and culture Inadequate audits by independent auditors
  • 9.
  • 10. Why „good‟ managers make bad ethical choices 10 Four Rationalizations To Justify Questionable Conduct 1) 2) Belief that the activity is not “really” illegal. Belief that it is in the individual’s or corporation’s best interest. 3) Belief that it will never be found out. 4) Belief that the company will condone actions that are taken in its interest and will even protect the managers responsible.
  • 11. Key Take Aways 11       History repeats itself. Be aware of your environment. If it seems too good to be true, it probably is. No job is worth breaking the law or committing unethical acts for. Your personal integrity is your most important asset – you own it and control it. “Trust, but Verify”.
  • 12. Ethical Values Violated      Unethical Work Culture Pressurising employees to manipulate accounts No productive outlet for employee dissent Employees who played along were rewarded; others were threatened. Fudged up the accounts; mislead the various stakeholders
  • 13. Corporate Whistleblowing  Cynthia Cooper and her team were the first people who uncovered the major fraud at Worldcom.  The voluntary release of non-public information, as a moral protest, by a member or former member of an organization outside the normal channels of communication to an appropriate audience about illegal and/or immoral conduct in the organization or conduct in the organization that is opposed in some significant way to the public interest.  Traditional corporate monitoring occurs through a variety of overlapping means, including: the company‟s board of directors, external auditors and attorneys, and the government.  “The highest good was the good will. To act from a good will is to act form duty. Thus, it is the intention behind an action rather than its consequences that make that action good” – Immanuel Kant.  As businesses continue to grow larger and more complex, whistleblowing has emerged as a valuable tool for eliminating future corporate fraud.  A reported 90 per cent of whistleblowers lose their jobs or are demoted.
  • 14. What the Group Recommends       Inculcation of ethical values into the work culture Embracing a bottom top approach Stringent auditing, both internal and external, procedures Divesting control in a larger number of hands Comparing companies in the same industry and sector based on performance indicators Keeping various stakeholders‟ interests in mind.
  • 15. Bibliography   Kaplan, R. S., and Kiron., D. (2007) Accounting Fraud at WorldCom. Harvard Business School Case 104-071, September 2007. (Revised from original April 2004 version.) Lyke, B. (2002). “WorldCom: The Accounting Scandal.” CRS Report for Congress, August 2002.http://www.law.umaryland.edu/marshall/crsreports/crsdocuments/RS21253_0829200 2.pdf  Romar, E., and Calkins, M. (2006) WorldCom Case Study Update. University o Massachusetts-Boston http://www.scu.edu/ethics/dialogue/candc/cases/worldcomupdate.html  American Institute of Certified Public Accountants (2005) The Worldcom Fraud http://www.aicpa.org/InterestAreas/AccountingEducation/Resources/DownloadableDocum ents/worldcom.ppt  WorldCom: The Case Against Bernard Ebbers (2011)https://www.youtube.com/watch?v=DW03eVMtOY4  WorldCom – What Went Wrong (2008)https://www.youtube.com/watch?v=7g_d-phoUrU
  • 16. Bibliography  Bernard Ebbers Photo : http://www.time.com/time/specials/packages/article/0,28804,1903155_1903156 _1903277,00.html  Scott Sullivan Photo: http://www.guardian.co.uk/pictures/image/0,,1070329609307,00.html  Buford Yates Photo: http://news.bbc.co.uk/2/hi/business/2307845.stm  David Myers: http://www.bloomberg.com/news/2012-06-21/obama-stimulusaids-worldcom-felon-with-health-care-loan.html  Betty Vinson Photo: http://www.deseretnews.com/article/600153804/2-workerssentenced-in-WorldCom-scandal.html?pg=all  Troy Normand Photo: http://www.deseretnews.com/article/600153804/2workers-sentenced-in-WorldCom-scandal.html?pg=all