Worldcom

Keyanna Pope

2/14/2016

Lp8 Assignment

WorldCom Cases

1. What did the Chief Executive Officer Ebbers cause subordinates to improperly manipulate? (Refers to complaint 19301)

* WorldCom’s reported revenue, selling, general and administrative expenses (“SG&A”), line cost expenses, net income, earnings per share (“EPS”) and earnings before interest, taxes, depreciation and amortization (“EBITDA”).

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)

* I wouldn’t comply. To avoid termination, I would notify the management in writing and keep a copy of any letters I send. If this doesn't work, inform the company's lawyers or auditors. As a last resort, speak to regulatory authorities.

3. What is the improper Accounting Scheme WorldCom engaged in? (Complaint 17588)

* They engaged in a fraudulent improper accounting scheme, intended to manipulate its earnings to keep them in line with Wall Street's expectations, and to support WorldCom's stock price.

4. What is the total amount of accounting fraud in 2001? (Complaint 17588)

* $17.794 billion

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)

* Cynthia feels that the reporting structure for the internal-audit function often presents a conflict of interest because many chief audit executives still report to the CFO, who determines their compensation. She stated that internal audit should report both functionally and administratively to the audit committee. She goes further, saying that, in general, internal audit has better relationships now with the audit committee, and more chief audit executives are reporting functionally to the audit committee. She believes that section 404 has proven to be a dead weight for corporate America. She states...