The second was the complicity of employees within WorldCom's accounting department. The third was the complicity of the external auditor, Arthur Andersen. In order to prevent such frauds from occurring, these different factors should be addressed. With respect tot Ebbers and Sullivan, two problems occurred that should be prevented in future.
The first is the heavy emphasis on option-laden compensation. This created an incentive for Ebbers to manipulate the company's stock, as his options were under water. A greater emphasis on hard salary and bonuses would partially address this problem, or an emphasis on performance-based compensation that takes long-run performance into account would be more useful. In addition, too much control was held by too few. For instance, the internal auditor was informed by the external auditor that he only answered to Sullivan. This concentration of power enabled the abuse. In order to prevent a re-occurrence of fraud, power should be more evenly distributed.
Only a few of the employees within the accounting department were willing to stand against the fraud. Most employees turned a blind eye to the behavior of Sullivan and Ebbers, and this allowed the fraud to not only take place but to continue over a period of months. The corporate culture allowed for this to take place -- ethical behavior was not given a high enough status in the corporate culture. Therefore, the culture needs to be changed in order to restore emphasis on ethical behavior.
The third problem was the complicity of Arthur Andersen, the external auditor. That Arthur Andersen no longer exists, combined with the provisions of Sarbanes-Oxley, in large part addresses the issue of external governance. In addition, the board of directors should include mainly external staff and there should be an...
The first three organizations in line to recuperate their funds were Citigroup, J.P. Morgan and General Electric Group. They had been offering financial solutions and encouragement to purchase the WorldCom stock based on a favorable business relationship. However, at the time when bankruptcy procedures were commenced, the three organizations recognized their losses and intended to recuperate them. A succinct presentation of the period surrounding the crisis could be reveled by
Shift to Activity-Based Accounting Discuss the Information Systems implications of this case. How do the business processes and the Information Systems relate to solve the problems encountered? The devolution and dissolution of the corporation known as WorldCom, due to accounting fraud rocked the business world. However, there is at least one potential solution for what is left of the company. The company has shifted from spreadsheet accounting to using activity-based software
Madoff Investment Securities LLC (BLMIS) committed one of the greatest financial frauds in U.S. history. Investigations revealed that Mr. Madoff operated an elaborate "Ponzi Scheme" that started operating in 1980s.Even though Madoff was initially supposed to invest all of his clients' money in the securities markets, he never did so. Instead, he deposited the whole amount in a certain bank account that he held with the Chase Manhattan Bank.
WorldCom: The Ethics of Whistle-Blowing In recent years, it has not been easy for employees to completely trust the corporations for which they work. Accounting scandals have made the average employee question business practices unlike before. The large corporate American framework built in culture; vision, core values, accountability and self-worth seem to have gone out the window with a certain degree of worry. Is it risky to work for a big
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Cooper/WorldCom In 2001, WorldCom was a company at the top of its game. Although 2001 was difficult for them, it was difficult for all telephone companies. The number of local phone companies had dropped from 330 to 150 in 2000. They lost market share and encountered significant competition to their internet services. However, it still had more than $30 billion in annual revenues, and even after extensive layoffs, had over 60,000
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