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WorldCom Case

I think the bigger picture of the WorldCom case involves a few things. Obviously, money and greed were large influencers within the company and the subsequent fraud, but it was also during a time when companies were seeing what they could get away with. I don't think it was pure coincidence that WorldCom and Enron happened around the same time. I think it was in the general culture that companies simply did what they had to do to make their stock price go up. That was the main focus. There were SEC regulations and GAAP compliance that people knew about but I don't think they took them seriously. Even the Arthur Anderson auditors didn't seem to take their jobs very seriously. Both Enron and WorldCom had major issues within their companies and AA did seem to notice until it was too late. WorldCom was deemed high risk by AA and still, nothing was done to investigate further or mitigate the risks. There was a clear lack of governance within AA and WorldCom.

WorldCom made two major mistakes. The first mistake was misrepresenting the expenses and capitalizing them on the balance sheet. The second was inflating revenues based on unallocated revenue accounts that had no supporting documentation. These are things that should've stood out to the auditors at AA. In the end, the CEO, Bernie Ebbers was sentenced to 25 years in prison for his involvement in the WorldCom fraud. The CFO, Scott Sullivan, was sentenced to five years in prison. Betty Vinson, former WorldCom accountant, received five months in prison and five months of house arrest. Another accountant, Troy Normand, was sentenced to three years probation.