WORLDCOM
PROFILE
WorldCom is an American
telecommunications company
founded by Bernad Ebbers in
1983.
During the 90s WorldCom made several
acquisitions of other
telecommunications companies which
increased its revenue from $152 million
in 1990 to $392 billion in 2001.
In 1998 WorldCom acquired MCI,
the second largest American
telecommunications company.
In 1998, WorldCom also purchased the
UUNet Company, Compuserve, and AOL
(America Online) Data Network which
made WorldCom the number 1 operator
in internet infrastructure.
CASES
In 1989 America experienced an
economic recession, which
drastically reduced demand for
internet infrastructure. This had
an impact on WorldCom's
revenue which decreased
dramatically. Bernad Ebbers as
CEO, Scott Sullivan as CFO and
David Myres as senior auditor
decided to take a way out by
changing the financial
statements.s in 1983.
WorldCom's violations
numbers was:
company inflated the
The way the WorldCom
Inflation of figures in the
current period occurs due to Network costs that should
01 incorrect accounting practices
and manipulation of financial
be charged to the income
statement are charged to
statements by the top
management of the Company. the capital account by the
Company.
01 This results in a larger
profit for the period so
Erroneous accounting practices that worldcom could
can be realized because of the increase profit by $ 3.84
02 assistance of external Arthur M
Andresen and the Company's
accounting staff. Established reserve funds were
02 improperly reduced by the
Company to manipulate the
WorldCom's CEO also amount of profit earned in the
03 used the Company's money current period. World com
for personal use. managed to manipulate is profit
by $2 M
CODE OF CONDUCT THAT BEING VIOLATED
WorldCom
Corporate KAP Arthur
Accountant lacked Andersen WorldCom case The company's
integrity as we collaborated violated this internal auditors do
presented false with principle because not disclose the
In the WorldCom case, data regarding the management to it did not disclose
wrong accounting
some accounting staff financial statement. cover up that facts of the
practices and fraud
did not carry out their The accountant financial committed by the
responsibilities by should present the statement company’s company's
practicing accounting true data fraud. KAP expenses. management.
practices that were not Arthur WorldCom Internal auditor
in accordance with the INTEGRITY andresen should have should disclose
rules. Accounting staff should apply dosclosed the fraud information
should carry out their
and comply facts reharding that violates the
proffesion with ethic the company rule of law, but
with the publlic instead they keep
accounant code expenses
itbsevtet.
RESPONSIBILITI ethic
ES
PROFESSIONAL
OBJECTIVI
B E H AV I O R
TY confidentiality
AUDITING FUNCTION
Cynthia Cooper was one of WorldCom's internal auditors and served as Vice President,
and was the first to suspect fraud at WorldCom. She was also one of the causes of the
collapse of the WorldCom Company. She has proven the impropriety of worldcom's
financial statements with responsibility to the public, she has saved Worldcom
investors, because the auditor's main responsibility is to the public not to the client. She
is also independent because she can identify questionable accounting practices or
ethical violations that occur therein. She also maintains professional skepticism
because she has a critical assessment of audit evidence, and is objective about the
evidence.
CYNT HI A COOPE R

KAP Arthur Andersen as an Independent External Auditor is a party that should uphold independence, and professionalism.
Arthur has violated the professional code of ethics and denied responsibility to the profession and the public by not reporting
audit findings manipulated by WorldCom. Arthur Andresen approved this manipulation because he lacked integrity, honesty,
and was not assertive in considering facts in the audit process. In addition, there was a relationship between Arthur Andresen
and WorldCom, where Scott Sullivan (CFO of WorldCom), and David Myres (controller) were former employees of Arthur
Andresen. If the auditor has a financial interest with the client, this can create a conflict of interest that affects auditor
independence.