WorldCom - Case Study

Accounting Fraud at WorldCom (Case Study)

Introduction

A question was raised by the journalist “How could anybody overlook a $3.8 billion shell game?” after the largest bankrupt in American history the telecommunication sector has been suffered a lot. Six month after the shock wave of Enron and WorldCom telecommunication groups files their balance after announcing accounting fraud of 3.85 billion. Furthermore, this fraud of WorldCom was due to the basic accounting principle.

Hence, in this paper there would be a discussion on the Background of the case, what was Fraud, Aspects of the importance of ethics in the case of WorldCom, Four aspects of the importance of ethics in the case of WorldCom, the basic provisions of the Sarbanes-Oxley Act and lastly the earlier adoption of Sarbanes-Oxley Act would have affected the WorldCom case.

Discussion

Business Ethics Importance - WorldCom

There are four importance aspects of Business Ethics Importance in the case of WorldCom. Hence, these are as followed:

The first aspect which I came across is the poor business practices which might impact on the people, communities and the environment. In the case of WorldCom fraud, there were many interest groups or constituents of the company who were really affected. The shareholders of the company lost about 98% of the value invested in the company, the employees of the company were left unemployed, customers were hurt after running out of power Supply Company, WorldCom providers were left with large customer and finally, U.S. companies no longer enjoy the same credibility and trust from the market before. 

Second aspect which I identified is the lack of training among the businessmen: Ebbers and Sullivan did not have any basic knowledge on business ethics and they were unable to differentiate the right and wrong features in business and this was an unethical action towards the business. As they had no choice beside of finding a solution with no reverting to Actus Reus that damage their own company along with others companies. Hence, they thought of applying their solution in order to survive in the serious crisis.

Beside this, third aspect is the necessity to understand the reason for ethical violations: In the corporate world, the approach of Actus Reus still exist as the transparency of the information within the employees lacks and they are unable to differentiate the right versus wrong. Lacking of the business ethic knowledge this problem increased in the WorldCom during world crisis.

Last aspect is the benefits and risk that is arises from Ethics for business in order to handle ethical issues. As the main leader did not have any adequate training of business ethics, they were unable to analyze the situation and were unable to propose any effective solutions. If they comprises of any such knowledge they would have analyze each aspect carefully. They would have chosen proper solution which would have increased their long term benefits and reduce fury risk.

Bernard Ebbers, president and chief executive of WorldCom, and its chief financial officer, Scott Sullivan, both change the accounting information of the company ...