Risks and Controls Accounting, Finance, SPSS Essay
ACCT 743: Accounting Information System Risks and Controls
Report 1 Instructions
30 Points
Write a report that addresses the items/topics listed below. Part of your job in this
assignment is to demonstrate to me that you have read Extraordinary Circumstances
and that you have thought about the lessons that Cynthia Cooper wants you to learn
from her book. Provide thoughtful, complete answers to the questions/prompts. Pay
special attention to spelling and grammar. Sloppy work will receive a lower grade than
work that is free of grammatical errors. There is no minimum or maximum page
requirement for this assignment. Your work will be graded based on the quality and
accuracy of your answers. Make sure that your report looks professional and that the
formatting/spacing is clean and easy to read. The file that you upload to Blackboard
should be named using the following format: LastNameFirstNameReport1 (e.g.
BestMarkReport1). Upload your completed assignment to Blackboard using the Report
1 submission link.
A. Explain the fraud that occurred at WorldCom in a way that non-accountants could
understand. Assume that your explanation will be read by people who have
never even heard of WorldCom.
B. The following quote is found on the back cover of the book: “Extraordinary
Circumstances makes it clear that the tone set at the top is critical to fostering an
ethical environment in the workplace.” Using examples from the book, explain
why the tone at the top of an organization is so important.
C. Do you think that Bernie knew about that fraud? Why or why not?
D. What blame, if any, should be directed at Arthur Anderson for the fraud that
occurred at WorldCom? Why?
E. Answer these two questions posed by Cynthia Cooper on page 363 of her book:
“What would you do, if like Betty Vinson or Troy Normand, your boss pressured
you to do something you didn’t believe was right? What if you were a high-level
executive, like Scott Sullivan or Bernie Ebbers, used to being at the top of your
profession, and your company wasn’t going to meet quarterly earnings unless
you fudged the numbers—just this once?”
F. Do you believe that ethics can be taught in school? Why or why not?
G. On page 365 of her book, Cynthia Cooper states the following: “Know what you
believe is right and wrong. Write down the values you will live by and what you
will do if your values collide.” Explain two or three of the values that you have
chosen to live your life by, and discuss why you feel that those values are so
important.
H. Why is the WorldCom fraud still relevant today, and what do you feel is the most
the important lesson that can be learned by studying the scandal?
Please answer the following questions. Thank you.
Students Name
Institutional Affiliation
Course
Instructors Name
Date
Risks and Controls
The WorldCom company scandal involved the company falsely increasing the earnings amount in its profit and loss account by approximately $4billion. The fraudulent accounting affected the company’s balance sheet, form 10-K filing, annual report, and income report. A company has to report its expenses to the shareholders as soon as the expense occurs. However, in the case of WorldCom, it took large sums of money from the operating expenses and spread them to the property accounts. Hence, instead of reporting the expenses to investors immediately, they reported them in small amounts over the span of years. In 2001, WorldCom increased its revenue by approximately $3billion and reported a profit of $1.4 instead of a loss. Therefore, if the operating expenses had been correctly documented, the company should have made a loss. By July 2002, the company had confessed to the accounting wrongdoings and gone bankrupt (Cooper, 2009).
The tone at the top of the organization is important since it creates a basis for the rest of the employees' environment. Employees have an obligation to obey their superiors. Therefore, if the superiors decide that the organization would take a certain direction, then the employees have to follow the same direction too. The tone is important because it dictates what the employees have to do regardless of whether it is ethically right or wrong. An example provided by Cynthia Cooper is the WorldCom scandal. The top management made decisions regarding the manipulation of the accounting information. The employees responsible for filling accounting reports had to obey the decision despite it being unethical.
Bernie, being the company’s CEO, placed him at a huge role in making important decisions regarding the company. Therefore, the chances are high that he knew about the fraud. The idea of manipulating the accounting information to portray that the company was making profits while in the real sense made losses was a major decision for the organization. Such a decision required authorization from the top management. Therefore, Bernie, being on the top management, could have played a role in making the decision. As the CEO of the company, Bernie had to show his investors that he had the capability to maximize their pro...
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