This paper explores the Accounting fraud that took place at WorldCom. Three aspects of the corporate culture are discussed including WorldCom’s harsh top-down management approach, the lack of written rules or a code of conduct, and the inaccessibility of many of WorldCom’s departments. The CEO’s desire to be the #1 stock on Wall Street is also discussed. WorldCom’s inappropriate booking and releasing of accruals is explored and proper accrual accounting procedures are stated. Three aspects of whistleblowing are discussed, including saving a company from a destructive end, facing public reprisal, and potential legal effects. Arthur Andersen is then used to explore the credibility of the Accounting profession when corporate fraud is unveiled.
Keywords: WorldCom, fraud, accruals, whistleblowing
The corporate culture at WorldCom was one that was very loose. Although several factors contributed to the loose and unhealthy environment at WorldCom, one of the greatest downfalls of the corporate culture was the harsh top-down management approach. Employees were advised to do as they were told without questioning management. In addition, CEO Bernard Ebbers and CFO Scott Sullivan dabbled in too many affairs that should have been handled by lower-level management. Too often they ordered overrides of basic procedures that resulted in the downfall of WorldCom. Orders were issued that resulted in the override of accounting procedures. This greatly contributed to the fraud.
Another factor that contributed to the unhealthy corporate culture at WorldCom was the fact that no written rules or code of conduct existed. The CEO himself thought it was a waste of time. This paired with the harsh top-down management approach seemed to create a lack of internal control as well. There were no real company rules and managers were completely capable of overriding any rules that may have existed.
The inaccessibility of other departments may have...
References: Accrual Accounting. (n.d.). In Investopedia. Retrieved from http://www.investopedia.com/terms/a/accrualaccounting.asp
Angeli, E., Wagner, J., Lawrick, E., Moore, K., Anderson, M., Soderland, L., & Brizee, A. (2010, May 5). General format. Retrieved from http://owl.english.purdue.edu/owl/resource/560/01/
Arthur Andersen. (n.d.). In Wikipedia. Retrieved from http://en.wikipedia.org/wiki/Arthur_Andersen
Beresford, D., Katzenbach, N., Rogers, Jr., C.B. (2003, March 31). Report of investigation. Retrieved from http://fl1.findlaw.com/news.findlaw.com/wsj/docs/worldcom/bdspcomm60903rpt.pdf
Niemeier, C. (2001, December 7). Speech by SEC staff: Remarks before the annual AICPA conference. Retrieved from http://www.sec.gov/news/speech/spch529.htm
Whistleblower. (n.d.). In Wikipedia. Retrieved from http://en.wikipedia.org/wiki/Whistleblower
Please join StudyMode to read the full document