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Accounting Fraud at WorldCom

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by

eric lee

on 11 November 2013

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Transcript of Accounting Fraud at WorldCom

Presented By :
ERIC LEE 205481
LIM SEOK ENG 207284
SURIANI BINTI AZIZ 207723
NURUL AMIRA BINTI CHE HASSAN 207800
FARAH NINI IZZATI BINTI MOHD SALEH 207893
Presented to :
PROF. DR. KU NOR IZAH BT KU ISMAIL
Bernard Ebbers
(Chief Executive Officer)
Scott Sullivan
(Chief Financial Officer)
David F.Myers
(Former Controller)
Buford Yates
(Director of Accounting)
Betty Vinson
(Director of Corporate Accounting)
Troy Normand
(accountant)
Cythia Cooper (Whislerblower)
(Chief Internal Auditor)
Issue ?
1. Poor Internal Control
2. Company Corporate Culture
3. Failure of Leadership
4. Ethical Issue
Fraud Triangle
Pressure:
1st leg of the fraud triangle
Financial pressure
Lifestyle pressure
Emotional pressure
Opportunity:
2nd leg of the fraud triangle
Allows fraudster to commit and conceal fraud
Allows the perpetrator to take personal gain
Rationalization:
3rd leg of the fraud triangle
one time act
fraud comitted were not violent
Fraud Committed at WorldCom
The fraud was accomplished in two main ways:
How does the fraud occurred and undetected for 3-4 years?
There are 5 situations can be explained why accounting fraud at WorldCom are undetected:
Lessons to be learned :
1. Do not let
emotions
affect your decision making capability
2. Knows
when to retreat
3. Beware of companies with
cultures

4. Be aware of the
close personal relationship
between the management and the board
5. Maintain your
independence
from management
Recommendation
1. Strong control systems
2. interactive system
3. Strong company governance and independent audit committee
4. Good company culture - belief and boundary system
Post Fraud Happening
WorldCom filed for bankruptcy protection under Chapter 11 of U.S Bankruptcy Code
17,000 employees lost their job, many left the company with worthless retirement accounts
jeopardized service to WorldCom's 20 million retail customers
affecting 80 million Social Security beneficiaries
WorldCom's Timeline
1984
the company was started by Bill Fields in Hattiesburg - Mississippi
1985
Bernard Ebbers Official become the company's CEO
1989
Become public company through merger with advantage companies
1990s
company evolved rapidly by acquiring and expanding across the world
1993
become the fourth-largest long-distance carrier in US
1995
Officially known as WorldCom
1998
become a full-service telecommunications company
Mid 2000
The company began to deteriorate and showed a decrease in company performance
the fraud are started here
21 July 2002
WorldCom applied for bankruptcy
3rd quarter of 2002
first quarter of 2001
fraud continue when Sullivan ask Vinson and Norman to transfer $771 million of line cost to capital expense accounts
Norman and Vinson review the first-quarter report and make a pact to stop
THANK YOU
Data Analysis ?
Key Players
known as Long Distance Discount Service (LDDS)
Accounting Fraud at WorldCom
Full transcript