Research Paper: Accounting Fraud at Worldcom

Pages: 3 (938 words)  ·  Bibliography Sources: 5  ·  Level: College Senior  ·  Topic: Accounting  ·  Buy This Paper

WorldCom's Collapse And The Accounting Profession

The decade which came before the turn of the millennium was a period of great economic expansion for North America and the global community. Advances in communication and web technologies, changes in the nature of the global economy and a period of generally robust corporate growth would suggest limitless opportunities for Americans at every level of the economy. However, this period would also be characterized by widespread deregulation of corporate behaviors and entitlement. The would create an environment of corporate lawlessness. Companies and CEOs would commit many dishonest acts in terms of the presentation of financial outlooks, accounting realities and performance reports for major upstarts and long-standing, reputable financial firms alike. The turn to the 2000s would bring with it new circumstances such as those that would accompany the events of September 11th and a bevy of devastating revelations concerning the behaviors or America's leading corporations. Across the next decade, Enron, Adelphia, Tyco, Nortel, Worlcom, Lehman Brothers, Merrill Lynch, Bear Stearns, AIG and Bernie L. Madoff Investment Securities LLC, just to name some of the most noted examples, would either fall into financial ruin after the revelation of massive corruption or would declare bankruptcy due to gross mismanagement. Among these, WorldCom is an instructive example of the accounting scandals that dismantled American economic growth over just a few years

At the time of its collapse, WorldCom was the single largest corporate bankruptcy declaration in American history. And the event of its collapse seems to have been foretold by a pointedly negative corporate culture. Highly decentralized and absent of any internal control mechanisms, Kaplan & Kiron (2007) report that the culture at WorldCom largely reflected that of American corporate culture on the whole. That is, an atmosphere of deregulation and poor administrative oversight would allow for a lack of accountability. This was particularly so in a legal regard. So indicates the text by Kaplan & Kiron, which finds that the company's CEO, Bernard Ebbers was particularly resistant to any meaningful legal oversight. The article notes that "Ebbers did not include the company's lawyers in his inner circle and appears to have dealt with them only when he felt it necessary. He let them know his displeasure with them personally when they gave advice -- however justified -- that he did not like. In sum, Ebbers created a culture in which the legal function was less influential and less welcome than in an healthy corporate environment." (Kaplan & Kiron, p. 3)

According to the article by Kaplan & Kiron, the ambition to be the top earning company on the stock market produced a culture of aggressive growth orientation. This was precipitated on the idea of ever-increasing revenues. It is thus that, in the face of the market downturn to which the whole global community has… [END OF PREVIEW]

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Accounting Fraud at Worldcom.  (2010, November 12).  Retrieved May 20, 2019, from https://www.essaytown.com/subjects/paper/accounting-fraud-worldcom/575477

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"Accounting Fraud at Worldcom."  12 November 2010.  Web.  20 May 2019. <https://www.essaytown.com/subjects/paper/accounting-fraud-worldcom/575477>.

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"Accounting Fraud at Worldcom."  Essaytown.com.  November 12, 2010.  Accessed May 20, 2019.
https://www.essaytown.com/subjects/paper/accounting-fraud-worldcom/575477.