1.What did the Chief Executive Officer Ebbers cause subordinates to improperly manipulate? (Complaint 19301) In (Complaint 19301) we were to go over what he caused the subordinates to improperly manipulate. I believe it was the WorldCom’s reported revenue, (SG&A)administrative and general expenses, line cost expenses, net income, the selling, (EPS)earnings per share and (EBITDA)earnings before interest, taxes, depreciation and amortization.
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) In (Complaint 19301) I do not believe I wouldn comply with Mr. Ebbers. In the avoidence of termination, I would
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What is the improper Accounting Scheme WorldCom engaged in? (Complaint 17588) In (Complaint 17588)we find that they were directly involved in a fraudulent improper accounting scheme. With the intent to manipulate said earnings to keep them on point with Wall Street's expectations as well as support WorldCom's stock price.
4.What is the total amount of accounting fraud in 2001? (Complaint 17588) The total amount of the fraud in (Complaint 17588) was $17.794 billion dollars.
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) In this (COMPLAINT 10590507) I believe that Cynthia more than likely feels that the reporting structure for the internal audit function more often than not shows a conflict of interest. With this said many chief audit executives still report to the CFO, who determines their compensation. She also has stated that the internal audit should report not just the functional but the administrative to the audit committee. She goes further by saying the general and internal audit now have better relationships with the audit committee. As well as more chief audit executives are reporting functionally to the audit committee. Cynthia also believes that section 404 has without a doubt has proven to be a dead weight for the corporate
According to PCAOB Auditing Standard 5 paragraph 2, “effective internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes. If one or more material weaknesses exist, the company 's internal control over financial reporting cannot be considered
Rogers, 2003). These accruals were supposed to reflect the estimate line costs and other expenses that WorldCom had not yet paid (Beresford, Katzenbach, & C.B. Rogers, 2003). Releasing the accrual is appropriate when it turns out that less is needed to pay the bills than has been expected to pay. Instead, WorldCom provided offset against reported line costs when the accrual was released which reduced reported expenses and increased pre-tax income (Beresford, Katzenbach, & C.B. Rogers, 2003). When the accruals started to run out, WorldCom came up with another method, capitalization of line costs. WorldCom started classifying line cost expenses as long-term capital investments in 2000 (J. Randel Kuhn & Sutton, 2006). These expenses are required to immediately recognize in the period incurred since the expenses are not for assets that can be capitalized and depreciated over their useful life in accordance with GAAP. By falsely recording these expenses, WorldCom reported an artificial increase in its net income and earnings before interest, taxes, depreciation and amortization (What Went Wrong at WorldCom?,
In modern day business, there can be so many pressures that can cause managers to commit fraud, even though it often starts as just a little bit at first, but will spiral out of control with time. In the case of WorldCom, there were several pressures that led executives and managers to “cook the books.” Much of WorldCom’s initial growth and success was due to acquisitions. Over time, WorldCom discovered that there were no more opportunities for growth through acquisitions when the U.S. Department of Justice disallowed the acquisition of Sprint.
Objectivity also needs to be evaluated to make sure the internal audit is reliable. The internal audit needs to be free of conflicting responsibilities as well
Marc Forster brings the viewer, World War Z, an action-packed, thrilling and zombie-filled adventure movie with Brad Pitt taking the lead role as Gerry Lane. The movie originated from the book, World War Z: An Oral History of the Zombie War, which was published back in 2006 by Max Brook. World War Z is cleverly thought out to keep the viewers on the edge of their seat always while the movie is roughly two hours long. World War Z is about the life of a former United Nations investigator, Gerry Lane, and his family. Suddenly, the world overran by a mysterious infection, which turns once innocent people into undead killing machines. After barely escaping the chaos at the beginning, Lane is then persuaded to go on a mission to investigate this
The movie Shock Doctrine revolves around the concept of the same name. The film begins by discussing psychological research on the effects of shock therapy. It is evident that a person under extreme stress and anxiety commonly experienced during a crisis functions and performs inadequately. It is noted that the studies are conducted by a man by the name of Milton Friedman, from the University of Chicago; the studies took place in the past, and some of the subjects are still recovering in the aftermath. From this research, interrogation techniques were learned and the concept of the shock doctrine was formed. Essentially through causing a crisis, the population of a country can be shocked into complying with accepting laws that favors the United States and capitalism. This theory coexists with Friedman’s belief in that government regulation is bad, and through a crisis a country would better itself with deregulation. The video uses Chile as an example and shows how America allowed a crisis to occur in Chile, through coups, interrogations and subterfuge. In the end a new government is formed that allows capitalism. Unfortunately afterwards violence and riots occur, as the rich gain most of the wealth and poverty rises. In addition to Chile, Argentina, Russia and even Iraq underwent the shock doctrine. Almost in every account, poverty rises and violence ends up erupting. The movie ends by showing how the US was in the process of the shock doctrine, and still is but the population has taken notice. Protests such as Occupy Wall Street are some of the initiatives necessary to bring awareness to the problems of class inequalities in order to prevent capitalism from benefitting the rich and increasing the wealth gap among the classes.
...ent expense the year it incurred. Due to the reporting error, in 2001 $3.055 billion was misclassified and 4791 million in the first quarter of 2002 (Law Maryland). In order to avoid getting caught, WorldCom was trying to be slick by leaving some line costs as current expense so that the error in classifying would not be easily detectible. This error in classifying expenses cause WorldCom to increase net income and assets. This fraud was found by the companies internal audit, Cynthia cooper, on May 2002. This detection was not good news to Arthur Anderson as they were the outside auditors of WorldCom. Anderson had already been affected by Enron scandal and neglecting to do to their job correctly. But with WorldCom they claimed that the chief financial officer Scott Sullivan did not tell them about the line costs being capitalized and they were unaware of this fact.
After the First World War that led to death of millions of people, many countries decided to put measures to avoid any future conflict. The League of Nations in the 1920s came up with the idea of collective security where countries acting together would discourage aggression and act to stop the aggressor. This did not work out well as countries failed to agree on common policies. As a result, appeasement was considered. It was a policy that was adopted by the British government in the1930s. It was formulated from the belief that some countries such as Germany were unfairly treated in the Versailles treaty of 1918-1919. Adolf Hitler came into power in Germany on January 1933 after exploiting the depression-afflicted economy and the vehement popular resentment against Versailles treaty. The Nazi leader started by alarming the diplomats on his hatred towards the parliamentary system of governance and democratic government. The policy of appeasement had good intentions, but failed to put measures against aggression by the Germany government, which eventually led to World War 2.
2 There were also charges of various misdeeds as well as decline in ethical standards. They have been accused of working with dictatorial regimes, intimate relationships with the US federal government, via a "revolving door" of former employees and driving up prices of commodities through futures speculation.
Bribes are not legal fees. Potential bribes were not disclosed in the books as well. This violation not only involves the accountants of Wal-Mart de Mexico, but the CEO, CFO, and auditors that were supposed to make sure records are transparent, accurate, and reliable. Sarbanes Oxley also requires CEO’s and CFO’s to certify that the financial reports are correct. The United States Department of Justice encourages companies to conduct internal investigations and to disclose the relevant facts to the authorities. Any suspicion that the Foreign Corrupt Practices Act is being violated should be reported to the US DOJ, which it was not reported by Wal-Mart. According to The New York Times, Wal-Mart did approach the Justice Department, but after learning about the Times’
The purpose of internal auditing and the professionals who provide internal auditing services according to the definition created by the Institute of Internal Auditors is to provide “an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.” Several guidelines and processes have been created to aid an internal auditor in providing the objective, value adding services they’re supposed to. The International Professional Practice Framework is the compass that provides internal auditors
Conflict of interest is a big problem between Enron and its auditing firms. It is believes that Enron’s auditors was hide many information and external auditors never aware or hide the losses in Enron. From audit committees to transparency committees would increase the likelihood that a firm’s key business ricks are transparent to investors (Healy & Palepu 2003, p. 21). Besides, a transparency committee can also help with internal auditor appreciate its primary responsibility lies with the board, not for personal interest and pleasing the leader.
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
Lyke, B and Jickling, M. (2002). WorldCom: The Accounting Scandal. CRS Report for Congress, p2.
The Tyco accounting scandal is an ideal illustration of how individuals who hold key positions in an organization are able to manipulate accounting practices and financial reports for personal gain. The few key individuals involved in the Tyco Scandal (CEO Kozlowski and CFO Swartz), used a number of clever and unique tactics in order to accomplish what they did; including spring loading, manipulating their ‘key-employee loan’ program, and multiple ‘hush money’ payouts.