Tell us what you need to have done now! In my opinion the main reason why the managers of WorldCom want to manage their earnings which then subsequent leads the to be engaged in fraudulent activities is mainly because the high expenses they have incurred that will then reflects a losses figure in WorldCom financial statements.
Another reason that can be noted regarding why WorldCom want to manage their earnings which then leads to in fraudulent activities is because WorldCom wanted to make a tax evasion.
This had been stated by the internal audit of WorldCom which indicates that they uncovered misdeeds that there were no accounting standards to support the expenses.
QUESTION 3 In your opinion, what are the strategies that the accounting profession can take to curb the abuses in earnings management that subsequently result in fraudulent activities? WorldCom does not require employees to own company stock in their retirement plans, and they are permitted to sell the shares they do have.
In reality, it will implicates that WorldCom will lose their investors because of the huge amount of losses that had been incurred by WorldCom. In order to protect their investors or more importantly WorldCom company status, the managers decided to make an accounting moves that can reduced their expenses.
WorldCom stated that it would cut 17, of its 85, employees. On July 1,WorldCom announced that it was also investigating possible irregularities in its reserve accounts.
The indictments issued August 28th charged that reserve accounts were reduced in order to provide credits against line expenses. In your opinion, why do managers of WorldCom want to manage their earnings and subsequently be engaged in fraudulent activities?
Companies establish these accounts to provide a cushion for predictable events, such as future tax liabilities, but they are not supposed to manipulate them to change reported earnings. On August 8th, WorldCom admitted that it had improperly used its reserves in recent years.
It shows that the higher authority are pressuring their stuff to increase their profit margin which are currently declining at any means whether its uses appropriate accounting standards or not.
Line costs are what WorldCom pays other companies for using their communications networks; they consist principally of access fees and transport charges for messages for WorldCom customers.Worldcom case 1. How Unethical Practices Almost Destroyed WorldCom 2. WORLDCOM LEADERSHIP CEO Bernard Ebbers CFO Scott Sullivan.
March 2nd, WorldCom Introduction Based out of Mississippi, WorldCom was put together by Founder Bernard Ebbers. Growing rapidly through mergers and acquisitions Mr. Ebbers pulled off what was considered quite a coup when his smaller WorldCom group took over MCI.
Case study on WorldCom THE WORLDCOM FRAUD: Presented By: Pratik WorldCom’s Background • Awoke the sleeping giant by leading the telecom industry into profitability in. FAR CASE STUDY WORLDCOM QUESTION 1 a) Discuss the earnings management technique employed by the management of World Com.
WorldCom admitted that the company had classified over $3. 8 billion in payments for line costs as capital expenditures rather than current expenses.
In Decembertwo years after this case was written, the telecommunications industry consolidated further. Verizon Communications acquired MCI/WorldCom and SBC Communications acquired AT&T Corporation, which had been in business since the 19th Century.
The acquisition of MCI/WorldCom was the. far case study: sept semester (Refer to the attached list of cases and concentrate only on those listed below) Pages 1 & 2: Capitalizing on oldest trick in book Page 7 Page 8 Page 9 Pages 10 & WorldCom finds accounting fraud: Former controller comes up more often: WorldCom’s bad math may date back to CFOs .Download