Worldcom Solutions Essay

704 Words Jun 6th, 2012 3 Pages
First of all, line costs are the amounts that WorldCom paid other companies to be able to use their communication networks for their customers and it included access fees and transport charges for messages. The line costs are an expense and instead of reporting them as an expense at the time, they chose to hold off on paying them and adding them in as an expense so that it would look as though WorldCom was earning more than they really were.
The first solution should have been to relook at the financial statements of WorldCom from an ethical standpoint. Instead of ignoring expenses or changing expenses into assets and assets into expenses, WorldCom should have followed the guidelines of the Generally Accepted Accounting Practices and
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This code of ethics should have been a written contract that each employee was required to sign after taking ethics training. Every year that training and contract should have to be renewed. I think that if WorldCom would have done this with their employees, when Scott Sullivan wanted the numbers to be changed, someone would have reported him instead of just doing what he asked them to do.
Then there is the area of the independent external auditor for WorldCom, Arthur Andersen. Andersen’s risk management software program had given WorldCom a rating of “high risk” for committing fraud and because of the telecommunications industry; the auditors upgraded them to “maximum risk”. WorldCom withheld information and altered information and documents that Arthur Andersen needed to complete his audit of WorldCom. He was even restricted access to information and personnel. Despite the fact that WorldCom neglected to inform Arthur Andersen about the line costs being capitalized, he still should have found the misclassifications during the audit because of the size of them. Mr. Andersen also should have realized that WorldCom could possibly attempt to use aggressive accounting practices being their current financial condition as well as the condition of the market at that time. After all, his risk management software noticed the possibility of aggressive accounting practices being used and rated WorldCom as “high risk” and even

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