Question

 The topic is What happened at World Com? Please describe the ethical structure and violations. For instance, was there a code of conduct? Why didn't it work? What was management like - were they ethical? What was the situation at World Com before and after the fraud? And so on. Include all relevenat information that you think is pertinent to the exploration of a company failure due to ethical violations.  Also be sure and comment on the role of the internal auditors, the CFO and the audit committee.

Answer 1

Worldcom fraud was $ 11 billion embazlment where they treated revenue expenditures as capital expenditures and created reserves to show how profitable their business was. Company was the 2nd largest telecommunication company of USA so it would not be correct to say they did not had the code of conduct set up. However it can be inferred that the code of conduct was violated by the persons who at very first place created them. Management was not ethical in their working and BOD also overlooked the practices followed by the senior management as it showed the outstanding financial results and were approved by the auditor.

Role of internal auditors was to verify the adjustments placed and report it to the audit committee who shall place the discrepencies in front of the board. However it seemed that they both failed to perform their duties. Moreover Sullivan and Myers were hired by world com as CFO and Controller, who had earlier worked for Arthur Anderson. By knowing the relationship of Sullivan, Myers with Anderson, accountants of world com were motivated to make profits regardless if it was ethical or unethical. Accountants were trying to present profit in financial statements to maintain the reputation of the company. They might have got more financial benefits if they did unethical practices. And also this might be reason that they were scared of losing their jobs.