Essay --

CFO Scott Sullivan was in charge of corporate accounting at WorldCom. Reporting to Sullivan was Cynthia Cooper, Vice President of Internal Audit, and David Myers, Controller. Buford Yates, Jr., Director of General Accounting, reported to Myers. Reporting to Yates was Troy Normand, Betty Vinson and Mark Abide. The accounting fraud perpetuated at WorldCom by multiple executives centers around fraudulently reporting line cost expenses. The 2002 indictment, United States of America v. Scott D. Sullivan and Buford Yates Jr., appropriately summarizes the fraudulently reported line costs expenses: From in or about October 2000 through or about June 2002, Scott D. Sullivan and Buford Yates, Jr., the defendants, and their co-conspirators, engaged in an illegal scheme to inflate artificially WorldCom’s publicly reported earnings by falsely and fraudulently reducing reported line cost expenses. To effect this illegal scheme . . . made entries in WorldCom’s general ledger, crediting line costs and debiting, among other accounts, various reserve and capital accounts. AS Sullivan, Yates, and their co-conspirators knew, there was no justification in fact, or under Generally Accepted Accounting Principle (â€Å"GAAP†), for theses entries. (United States of America V. Scott D. Sullivan and Buford Yates, Jr. 2002, 7) As a result, WorldCom was able to raise cash flows and profits over this time period. These accounting practices enabled WorldCom to â€Å"disguise the firm’s actual nets losses because capital expenditures can be deducted over a longer period of time, whereas expenses must be subtracted from revenue immediately† (Ferrell 1) Unethical Decision Makers Scott Sullivan and Buford Yates were not the only executives or employe... ...uired if Emigh knew who had informed Sue Dean of the new policy. Again, being true to his character, Emigh was upfront and told Smith that he, in fact was the one who had gone to Sue Dean. The following day, Emigh was informed by his immediate supervisor that he had committed an infraction by not following orders and carrying out the new policy. A senior vice president had ordered that Emigh be formally reprimanded and punished (Reaves 6). Emigh knew it was going to be bad but explained to his wife that he had a responsibility to the share holders as well to himself. Ten weeks later, Kim Emigh was fired. In March 2002, Cynthia Cooper was informed of the fact that $400 million had been moved from WorldCom’s reserve account resulting in a falsely stated income statement. Cooper went to the external auditor, Arthur Anderson, who told her that it was not a problem.