WorldComs Lack of Management Controls Leads to Melt Down
During the spring of 2002, Cynthia Cooper, Vice President of Internal Control at WorldCom, became increasingly suspicious when Scott Sullivan, Chief Financial military officer (CFO) and Arthur Andersen, the independent auditing firm used for Securities and Exchange Commission (SEC) filings, could not adequately answer questions ab let out discrepancies found on the pecuniary reports. Mrs. Cooper decided to conduct an internal investigation, despite orders from the CFO, and what she bring out rocked the business and account statement world forever. On June 20, 2002, Mrs. Cooper travelled to Washington D.C. to reveal to the WorldCom audit committee that the monetary statements had been mislead by booking $3.8 billion in operating expenses as capital expenses, which prompted the WorldCom Board of Directors to fire Scott Sullivan and accept a sufferance from controller, David Myers. On July 21, 2002, WorldCom, the nations No. 2 long-distance phone company, announced that it would be filing for Chapter 11 bankruptcy protection.
The discrepancies that Mrs. Cooper uncovered turned out to be part of the biggest accounting dirt in history.
WorldCom had to restate its financial results for 2001 and the prime(prenominal) quarter of 2002 to shorten the $3.8 billion in cash flow off of its books, which wiped out all of their profit for that timeframe. There were transfers between internal accounts of more than $3 billion in 2001 and $797 million in the first quarter of 2002. These practices did not conform to generally accepted accounting principles (GAAP) although the independent auditing firm attested to the fact that everything that was on the financial reports was in compliance with GAAP. The company should have inform a net loss in those years, but instead reported a gain in order to keep the financial health of the company a secret. When the WorldCom scandal was...If you want to string a full essay, order it on our website: Ordercustompaper.com
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