SKANDAL AKUNTANSI KEUANGAN WORLDCOM
Skandal WorldCom WorldCom mencuat setelah setelah perusahaan perusahaan ini mengaku telah mengembungkan mengembungkan keuntungannya hingga US$ 3,8 milyar pada periode Januari 200 dan !aret 2002" #ada tahun 200 hingga aal 2002, WorldCom memasukan %S $ 3,8 milyar yang merupakan biaya operasi normal ke dalam pos in&estasi" 'al ini memungkinkan perusahaan tersebut menekan biaya selama selama bertahu bertahun(t n(tahu ahun" n" )engan )engan hilangn hilangnya ya pos biaya biaya operas operasion ional al ini, ini, maka pos keuntu keuntunga ngan n men*adi lebih besar karena biaya yang seharusnya mengurangi keuntungan sudah diperkecil" )engan keuntungan yang terlihat besar, maka akan menun*ukkan baha kiner*a WorldCom sangat bagus" Saham WorldCom yang dicatatkan di bursa tahun +++ pada harga US$ 2, langsung an*lok +- persen se*ak Januari 2002 akibat mencuatnya skandal tersebut" Selain itu setelah perginya pendiri dan chief executive officer WorldCom, WorldCom, .ernie /bbers, pada bulan %pril 2002, skandal lainnya mencuat" )iketahui /bbers memin*am *utaan dollar %S dari perusahaan terseb tersebut ut untuk untuk menanggu menanggung ng kelebi kelebihan han harga harga yang harus harus dibaya dibayarny rnyaa untuk untuk saham( saham(sah saham am perusahaan itu sendiri" )alam proses pengadilan selama minggu itu, Jaksa menuding /bbers pikirannya tergoda untuk men*aga saham Worldcom Worldcom tetap tinggi dan men*adi panik oleh tudingan dia memperolah US$ -00 *uta pin*aman pribadi yang di*amin dengan saham Worldcom" #ada #ada akhir akhir tahun tahun 200 2000 0 hingga hingga perten pertengah gahan an tahun tahun 2002, 2002, pemeri pemerinta ntah h %S mengkl mengklaim aim /bbers /bbers mengintimi mengintimidasi dasi C1 chief financial officer Scott Sulli&an untuk menutupi pengeluaran yang tidak terkontrol yang mencapai miliaran dolar dan menyebutnya sebagai pendapatan yang tidak selayaknya" 45a adalah WorldCom dan WorldCom adalah /bbers" 5a membangun perusahaan itu" 5a melarikan diri, tentu ia yang harus bertanggung *aab atas kebocoran itu,4 u*ar Jaksa William John Johnso son n kepad kepadaa *uri" *uri" 6amu 6amun n penga pengacar caraa /b /bbe bers rs memb membant antah ah baha baha keboc kebocor oran an itu itu adal adalah ah tanggun tanggung g *aab *aab Sulli& Sulli&an" an" Sebelum Sebelumnya nya Sulli& Sulli&an an yang yang bertin bertindak dak sebagai sebagai saksi saksi dari dari pihak pihak pemerintah mengatakan baha /bbers menginstruksikan dirinya untuk mencatatkan *umlah ke dalam dalam neraca neraca hingga hingga memenuh memenuhii ekspekt ekspektasi asi Wall all Street Street"" Jaksa Jaksa %gung %gung %S %lber %lberto to 7onale 7onaless menyebut keputusan ini sebagai 9kemenangan bagi sistem hukum9" 7onales mengatakan, *uri telah mengenali baha kecurangan itu ditimbulkan dari mana*emen tingkat menengah hingga eksekuti: puncaknya" Selain itu /bbers *uga masih menghadapi proses pengadulan sipil termasuk tuntutan dari perusahaan yang telah men*amin US$ -00 *uta pin*aman prbadinya" Sementara itu 2 mantan direktur perusahaan termasuk satu bank in&estasi yang men*adi underriter dan auditor %rthur %rthur %ndersen *uga akan menghadapi pengadilan sipil dari para in&estor yang marah"
SKANDAL CEO - BERNARD EBBERS
C/1 .ernard /bbers men*adi sangat kaya dari kenaikan harga sahamnya di saham WorldCom umum" 6amun, pada tahun 2000, industri telekomunikasi memasuki masa krisis yang menyebabkan WorldCom mengalami kemunduran serius, menyebabkan pemerintah %S melalui )epartemen ;ehakiman memaksa perusahaan ini untuk membatalkan rencana merger dengan Sprint pada pertengahan 2000" #ada saat itu, saham WorldCom menurun dan /bbers berada di baah tekanan tinggi dari bank untuk menutupi kea*iban kekurangan margin pada saham WorldCom(nya yang digunakan untuk membiayai *enis usaha yang lainnya, seperti kayu, kapal pesiar" 1leh karena itu selama tahun 200, /bbers membu*uk para dean direksiWorldCom untuk
memberinya
kredit
korporasi
dan
*aminan lebih
dari %S $
-00
*uta
untuk
menutupi kea*iban margin tersebut" #ermohonan ini dikabulkan karena para dean direksi berharap baha pin*aman yang diminta C/# /bbers tersebut akan mencegah /bbers untuk men*ual se*umlah besar saham WorldCom pada akhirnya akibat tekanan di harga pasar saham yang kian an*lok" 6amun, akhirnya strategi ini gagal dan /bbers digulingkan sebagai C/1 pada bulan %pril 2002 dan digantikan oleh John Sidgmore, mantan C/1 UU6/<
" Underreporting 9line cost? biaya interkoneksi dengan perusahaan telekomunikasi lainnyadengan meman:aatkan biaya(biaya pada neraca daripada :akta pengeluaran mereka" 2" !enggelembungkan pendapatan dengan memasukkan catatan akuntansi palsu dari 4alokasi dana perusahaan yang belum diisi4" #ada tahun 2002, sebuah tim audit internal WorldCom beker*a secara rahasia, menyelidiki dan menggali kemana alokasi dana perusahaan yang hilang sebesar $ 3,8 milyar"'ingga pada akhirnya, mereka menemukan *aabannya baa dana perusahaan tersebut telah diseleengkan oleh C/1 dan rekan(rekan ker*anya untuk memperkaya diri mereka sendiri diluar standar pendapatan
seharusnya" Segera
kemudian komite
audit perusahaan
dan
dean
direksi
diberitahu oleh para audit mengenai masalah penipuan akuntansi ini"
mengundurkan diri" ;emudian pada tahun 200, %rthur %ndersen dan US Securities and /@change Commission S/C meluncurkan sebuah in&estigasi masalah ini pada tanggal 2 Juni 2002"
Sehingga pada akhir
tahun
2003,
diperkirakan
baha
total
aset
perusahaan ini ternyatatelah diseleengkan oleh C/1 mereka sekitar $ miliar" %kibat masalah besar yang diakibatkannya, pada A !aret 200A .ernard /bbers dinyatakan bersalah dari semua tuduhan, karena telah terbukti melakukan kecurangan, konspirasi dan penga*uan dokumen palsu dengan regulator(semua terkait dengan skandal akuntansi %S $ miliar di perusahaan telekomunikasi yang dia dirikan" )ia di*atuhi hukuman 2A tahun pen*ara" #e*abat WorldCom lainnya seperti mantan C1 Scott Sulli&an dituntut dengan hukuman pidana dalam kaitannya pada tanggal 2 !aret 200- untuk tuduhan penipuan sekuritas, konspirasi dan menga*ukan laporan palsu" Sedangkan mantan pengaas keuangan )a&id !yers *uga telah mengaku bersalah atas penipuan sekuritas, konspirasi untuk melakukan penipuan sekuritas, dan
menga*ukan
laporan
palsu
pada
tanggal
2B
September,
2002"
!antan
direktur akuntansi .u:ord =ates *uga telah mengaku bersalah atas konspirasi dan tuduhan penipuan pada B 1ktober , 2002" !antan(mantan mana*er akuntansi .etty inson dan
#ada tanggal 2 Juli 2002, WorldCom menga*ukan perlindungan kebangkrutan"#enga*uan tersebut merupakan penga*uan kebangkrutan terbesar dalam se*arah %merika Serikat hingga kebangkrutan berikutnya pada saat runtuhnya Dehman .rothers 2008" #roses kebangkrutan WorldCom diadakan sebelum US ederal ;epailitan 'akim %rthur J" 7onale yang bersamaan mendengar proses kebangkrutan /nron yang merupakan kasus kebangkrutan terbesar kedua yang dihasilkan oleh skandal akuntansi di dalam perusahaan"
6amun hal ini belum cukup untuk membayar banyak kreditur kecil, yang telah menunggu selama dua tahun untuk pengembalian uang mereka di WorldCom" Sebagian besar dari para kreditur kecil itu adalah mantan karyaan WorldCom sendiri" Sehingga pada tanggal B %gustus 2002, kelompok e@WorldCom A00 diluncurkan" !ereka ini terdiri dari mantan karyaan WorldCom yang bertu*uan mencari pembayaran penuh dari uang pesangon"
)alam ilmu
politik dan
ekonomi,
masalah principal(agent atau
dilema lembagamemperlakukan kesulitan yang muncul dalam kondisi in:ormasi yang tidak lengkap dan
asimetrisketika seorang
seorang agen, menimbulkan
pemimpin menyea atau
beberapa
membayar
masalah seperti kon:lik
haard dan menge*ar kepentingan(kepentingan dari kepala
sekolah itu
moral
sendiri" .erbagai
mekanisme dapat digunakan untuk mencoba menyelaraskankepentingan agen dalam solidaritas dengan orang(orang keuntungan,
dari pemimpin,
seperti mengatur tari:potongan
upah e:isiensi, pengukuran
E komisi, pembagian
kiner*a termasuk laporan
keuangan, agen postingan obligasi" !asalah principal(agent ditemukan di sebagian besar pada hubungan karyaan, misalnya,
ketika pemegang
saham mempeker*akan
eksekuti: puncakperusahaan" =ang mana para eksekuti: tersebut kurang mendapat batasan( batasan sampai dimana mereka memiliki keenangan dalam mengurusi usaha yang dipercayakan oleh principal kepadanya" Untuk itu perlu adanya sebuah kontrol eenang dalam sebuah peraturan perusahaan yang berkenanaan dengan hal tersebut, agar masalah seperti kasus WorldCom tidak ter*adi lagi dikemudian hari" =aitu perlu adanya kontrak kerja yang *elas" )alam konteks kontrak ker*a,kontrak
indi&idual membentuk metode utama
menghubungkan sedekat optimal in:ormasi
yang
dari insenti: restrukturisasi, dengan
tersedia tentang
kiner*a karyaan, dan
kompensasi untuk kiner*a itu" ;arena perbedaan dalam kuantitas dan kualitas in:ormasi yang tersedia tentang kiner*a karyaan indi&idu, kemampuan karyaan untuk menanggung risiko,dan kemampuan karyaan
untuk memanipulasi metode
e&aluasi,
rincian struktural kontrak
indi&idual sangat ber&ariasi, termasuk mekanisme seperti sepotong tari:, pilihan, bonus yang bebas,
promosi, pembagian
keuntungan,
e:isiensi upah,
kompensasi ditangguhkan, dan
seterusnya" .iasanya, mekanisme *enis ker*a> iraniagasering komisi, peker*a
ini digunakan dalam
menerima beberapa
atau semua remunerasi mereka sebagai
produksibiasanya dibayar
peker*a kantor biasanya dibayar lembur
yang
konteks berbagai
per
dibayarkandan
*am, sementara
*ika, biasanya pada
tingkat
yang lebih tinggi daripada tari: per *am tersirat oleh ga*i bulanan atau setengah bulanan" )engan kontrak ker*a yang *elas, serta sistem pemberian insenti: yang *elas dan sesuai dengan standar ter*adi yang telah ditetapkan perusahaan, termasuk dengan per*an*ian dengan pasal(pasal punishment apabila melanggar S1# perusahaan sebelum diadakan perekrutan, baik itu untuk karyaan di tingkat baah maupun hingga karyaan di tingkat C/1" Sehingga sedikit banyak, hal ini dapat membantu mengurangi resiko(resiko penyalahgunaan eenang yang mungkin sa*a akan dilakukan oleh agent(agent yang disea oleh principal" SEJARAH WORLDCOM
Dong )istance )iscount Ser&ices, 5nc D))S pada aalnya berdiri di 'attiesburg, !ississippi pada +83" ;emudian pada tahun +8A .ernard /bbers D))S dipilih men*adi C/1( nya" #erusahaan go public pada tahun +8+ melalui merger dengan %d&antage Companies 5nc" Se*ak saat itu nama perusahaan diganti men*adi D))S WorldCom pada tahun ++A, dan kemudian diganti hanya WorldCom pada tahun 2003" #ertumbuhan
perusahaan
WorldCom
terutama
didorong oleh akuisisi terhadap
perusahaan(perusahaan telekomunikasi lainnya selama tahun ++0(an dan mencapai puncaknya dengan akuisisi !C5 pada tahun ++8" )iantara perusahaan yang dibeli atau bergabung dengan WorldCom adalah %d&anced Communications Corp" ++2, !etromedia Communication Corp" ++3, Fesurgens Communications 7roup++3, 5). Communications 7roup, 5nc ++-, Williams
WorldCom"
#ada
ebruari
++8,
WorldCom melakukan pembelian
online
CompuSer&e yang merupakan pelopor dari perusahaan induk .lok ' G F nya" WorldCom kemudian mempertahankan Compuser&e )i&isi Dayanan Jaringan, men*ual layanan online untuk %merica 1nline, dan menerima pembagian *aringan %1D, %6S" %kuisisi )ige@ )57H pada bulan Juni 200 *uga kompleksI Worldcom mengakuisisi perusahaan induk )ige@ itu, 5ntermedia ;omunikasi, dan kemudian men*ual semua non()ige@ 5ntermedia aset untuk %llegiance
tanggal
0
6o&ember
++B,
WorldCom
dan
!C5
Communications
mengumumkan merger senilai US $ 3B milyar untuk membentuk !C5 WorldCom, sehingga hal
ini merupakan merger terbesar dalam se*arah %S" #ada tanggal A September ++8, perusahaan baru, !C5 WorldCom, mulai dibuka untuk bisnis" #ada A 1ktober +++ Sprint Corporation dan !C5
WorldCom
mengumumkan
per*an*ian merger antara
dua
perusahaansebesar $
2+ !ilayar"6amun pada tanggal 3 Juli 2000, dean direksi dari kedua pihakperusahaan bertindak untuk mengakhiri merger" 'al ini karena mendapat larangan dari pemerintahan %S, karena per*an*ian
ker*asama
tersebutdianggap merupakan
dua
bagian praktik
perusahaan
telekomunikasi
monopoli" ;ini !C5
WorldCom
besar menamai
dirinya dengan4WorldCom4 tanpa Sprint men*adi bagian dari perusahaan" #erusahaan dengan kode saham Wcom di bursa 6asda ini telah memiliki B3"000 pegaai yang tersebar di seluruh dunia" Sebanyak 8"300 di antaranya adalah pegaai yang tinggal di /ropa,
Posted by Dian Pratiwi Hikari Ai Chan
ETHICS IN ACCOUNTING: THE WORLDCOM INC. SCANDAL Conf.univ.dr. Lucian Cernuşca Aure! "!aicu# Univer$i%&' Arad' $%r. (ia)a S*or%uri!or' nr. +,' -!. /' a*%. 0' 1+,+20 Arad' (3one: ,01,425/14' !uciancernu$ca678ai!.co8
What is ethics? What does ethics have to do with accounting? How does a scandal affect the business environment and the society? This article will explain just those questions by analyzing a “famous fraud scandal! World"om #nc$ The article discusses the chronology of events that lead to the World"om #nc$ collapse and explains how the figures were manipulated for the owners% interest and what the accounting scam was$ The article ends with the consequences of the scandal and what the effects were on the society and business environment in general$
JEL Classification: M4 Accounting and Auditing Key words: ethics, accounting, bankruptcy, orldCo! "nc#, e$penses# W3a% i$ e%3ic$9 W3& e%3ic$ in accoun%in79
Ethical %alues are the foundations on which a ci%ili&ed society is based on# ithout the!, the ci%ili&ation collapses# "n business, the purpose of ethics is to direct business !en and wo!en to abide by a code of conduct that facilitates public confidence in their product and ser%ices# "n the accounting field, professional accounting organi&ations recogni&e the accounting profession's responsibility to pro%ide ethical guidelines to its !e!bers# Ethics !ust and should be taught# (eople are not born with the desire to be ethical or be concerned with the welfare of others# And contrary to all beliefs, one person can !ake a difference# )ne of !y fa%orite *uotes says: # am only one$ &ut still # am one$ # cannot do everything' &ut still # can do something( )nd because # cannot do everything # will not refuse to do the something that # can do$
+Edward E%erett ale Accounting ethics is both a nor!ati%e and descripti%e discipline# "nterest in business ethics and accounting ethics accelerated dra!atically during the ./01s and .//1s, both within !a2or corporations and within acade!ia# hen we talk about accounting ethics, we always link the ter! with creati%e accounting, earnings !anage!ent, !isleading financial state!ents, securities fraud, insiders transactions, bribery, e$ecuti%e co!pensation and !any !ore# "f you occupy a position of leadership, then your actions will profoundly influence those who follow your e$a!ple# And the well known cases of fraud, orldCo! and Enron included, pro%e 2ust that# T3e Wor!dCo8 Inc. Scanda! ;an
)n July 3., 3113, orldCo! "nc# filed for Chapter .. bankruptcy protection, according to John idg!ore, the co!pany's chief e$ecuti%e# 5he bankruptcy is the largest in 6 history, being twice as large as Enron's record7setting filling in 8ece!ber 311.# orldCo! "nc# ad!itted on June 39, 3113, that it had falsely booked ;#09 billion in e$penses to !ake the co!pany appear !ore profitable# Arthur Anderson, the co!pany's auditor, accused cott ulli%an, orldCo! "nc#'s financial officer, of withholding crucial infor!ation about the co!pany's bookkeeping# ulli%an was fired the sa!e day# ector, both fro! 6A, drafted a business plan to start a business offering long distance
ser%ices at a discount# 5he co!pany was created and was na!ed ?Long 8istance 8iscount er%ices@ +L88-#
Corp#,
>esurgens
Co!!unications
Broup
"nc#,
Metro!edia
Co!!unications Corp#, "8< Co!!unication Broup "nc# and illia!s 5eleco!!unications Broup "nc# and changed its na!e to orldCo! in .//9# 5he ac*uisitions continued and the new na!ed orldCo! took o%er M Co!!unications "nc# in .//D, 66et 5echnologies "nc, in the sa!e year, MC" Co!!unications Corp# in .//0 for 41 billion,
VYbr i dCom s t ockhi t sal l t i mehi gh f ormar ketval ueat$125B. $63. 50. 01 F1 so so
41 ;) 31 .1 1 + ) 6 > C E : C G M ) E H , " > 5 C A L L , ) ) I E > ) 5 E : 5 ) C K ( > " C E ) > . / / 3 , . / / 9 A > E AI E >A BE , )5 E> C L) E A5 E 8 ) M) 5
=i7ure + WordCo8 3i%$ a!!>%i8e 3i73 for 8ar
At the peak of the teleco! boo!, orldCo! "nc# was %alued at .01 billion#
billion in e$penses which will wipe away the profits declared in 311. and for the first se!ester of 3113# As a result, within a day the stock price has fallen to 1#1/# =i7ure Wor!dCo8 3i%$ a!!>%i8e !o? $%oc< *rice ource: Jake 6lick, 3113, World"om*s financial bomb , at C Money , http:GG!oney#cnn#co!G3113G1DG39GnewsGworldco!G , %isited riday, June .9, 311F
ordCo! then started its own internal in%estigation# As a result, ordCo! fired cott 8# ulli%an the chief financial officer and accepted the resignation sub!itted by 8a%id Myers# 5he CE), John idg!ore apologi&ed to the in%estors for the accounting !istakes, while cott 8# ulli%an told that he infor!ed Ebbers about the book7keeping !aneu%ers that !ade the co!pany look better than it really was# )n July 3., 3113, orldCo! ha%e filed for bankruptcy which was the largest bankruptcy in 6 history#
Securities and /@change Commission
JUNE 25, 2002 0 (SOUROES: ONWMONEY, FIRST CALL, HOOVER'S) NOTE: STOCK PRICES FOR 1992, 1995 ARE
AVERAGES, OTHERS CLOSE AT EN OF MONTH
WorldCom admits to Overstating fnancials !" #$%&1$% S* +-./ under a dollar. so 0 0
so 0 $O 20 10
ulti!ate corporate accounting fraud in the world# Andersen, orldCo!'s auditor, declared that the internal audit report could not be relied on in the %iew of the accounting !anipulations# "t is relati%ely easily for an auditor to detect error but earnings !anage!ent can in%ol%e sophisticated fraud that is co%ert# 5he re*uire!ent for !anage!ent to assert that the accounts ha%e been prepared properly offers no protection where those !anagers ha%e already entered into conscious deceit and fraud# Auditors need to distinguish fraud fro! error by identifying the presence of intention# (art of the difficulty lies in the accepted recognition that
there is no such thing as a single ?right@ earnings figure and that it is possible for legiti!ate business practices to de%elop into unacceptable financial reporting# W3o *aid for %3e fraud$9
"n the first instance, the e!ployees who rapidly disco%ered that i!!ediately after the bankruptcy announce!ent, .F,111 orldCo! workers got the push# e$t in line were the in%estors as the shares dropped fro! o%er D1 to less than a dollar# ight after the bankruptcy announce!ent, the stock plu!!eted in early trading reaction, followed by crawling back up and closing !i$ed# 5he 8ow Jones industrial closed at /,.31#.., while the tandard (oors 911 "nde$ closed at /F;#9;, after falling D#F. and 3#D., respecti%ely# Wor!dCo8 Inc. C3rono!o7& of Even%$
)n ebruary 0, 3113, orldCo! "nc# reduces the re%enue and earnings pro2ections for 3113 and announced second *uarter e$penses of .9731 billion to write down so!e ac*uired operations# At the sa!e ti!e, the co!pany's CE),
At the end of the !onth, the co!pany eli!inated its MC" Broup tracking stock, in hope of sa%ing so!e !oney that would ha%e gone to the di%idends# At the beginning of June 3113, orldCo! announced its intension to cut further .9111 e!ployees while restructuring and planning to sell its wireless unit# )n June 34, 3113, analyst Jack
Brub!an wrote a negati%e report on the finances at orldCo! "nc# and the shares fell below . +see igure 3-# At the end of June 3113, orldCo! "nc# announced that during the entire 311. and first *uarter of 3113, co!pany's re%enue e$penditure had been treated as capital e$penditure and, as a result, there has been an o%erstate!ent of profits by ;#093 billion in the financial results# Another declaration was !ade on August /, 3113 which doubles the fraud figure declared earlier to !ore than F#D billion, which !akes orldCo! the co!pany with the highest figure fraud in history orldCo!'s first announce!ent worked like a bo!bshell# )b%iously in%estors were irritated, which resulted i!!ediately in hitting down the 8ow "ndustrials !ore than .41 points and A8A Co!posite "nde$ by !ore than ;N# 5he in%estors sold the orldCo! shares at any price reali&able# hile in June .///, the orldCo! shares were traded at D3Gshare, they collapsed to 1#1/ in August 3113# ot surprisingly, on August /, 3113 another ;#0 billion fraud was unearthed at orldCo! by the sa!e auditors# 5he co!pany also announced that since an internal in%estigation was going on, they !ight find !ore accounting proble!s# orldCo! declared they would restate their financial reports fro! ./// onwards, as a result of the new findings# ith the e$perience of Enron, another ?resounding@ accounting scandal in Corporate A!erica, EC has i!!ediately approached the court seeking orders prohibiting orldCo! and its affiliates fro! destroying, hiding or altering rele%ant docu!ents and prohibiting the co!pany to !ake any e$traordinary pay!ents#
MAY 21,2002
Wor i dCom el i mi nat espl anf orMCIt r acki ngs t ock. $1. 65.
r
1OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO
• 0-
P)6>CE: CGM)EH, ">5 CALL, ))IE>Q ) 5 E : 5 ) C K ( >" C E ) > . / / 3 , . ; ; 9 A > E A I E > A B E , ) 5 E > C L ) E A 5 E 8 ) M ) 5 R01 F1
so so 41 ;) 31 .1
Ho? ?a$ %3e fraud carried ou%9 Let us take a look at so!e selected financial data, fro! .//F to 311.# "n the Appendi$,
we also listed the ?Consolidated state!ents of operations@ and the ?Consolidated
of orldCo! "nc#, for .//0 and .///#
>e%enue )perating "nco!e 5otal Assets )perating Margin +N-
.//F F;04 .1.0 3;9/D .;#F0
.//0 .FDF0 +/F90D41. +9#9.-
./// ;9/10 F000 /.1F3 3.#/D
3111 ;/1/1 0.9; /0/1; 31#09
7 in !illions7 311. ;9.F/ ;9.4 .1;/.4 /#/0
orldCo! inc# financial data Adapted fro!: I#>#K# Chary,3114, +thics in )ccounting$ ,lobal "ases and +xperiences , World"om #nc$' 5he "CA" 6ni%ersity (ress, "ndia, pg# 4F
8uring .//1s, when orldCo! "nc# was !arching forward with endless takeo%ers and !erges sprees, the !arket conditions for their ser%ices slowly started to deteriorate# 5he data shown abo%e was before restate!ent figures# 5he point is to show how the accou nting !anipulations changed the data# 5he operating !argin which indicates the co!pany's profitability was not satisfactory e%en in .//0# ince the !ergers didn't i!pro%e the !argin either, the co!pany reali&ed during ./// and 3111 that using accounting !anipulations could lead to stable earnings# owe%er, the planning was inade*uate for !aintaining the earnings by 311.# As a result, in 311. the profit !argin fell down to less than half when co!pared to the pre%ious year's earnings# 8uring 311., orldCo! "nc# split into two tracking stocks: MC" orldCo! "nc, the long7 distance consu!er carrier and orldCo! "nc, which sells %oice and data ser%ices to corporations# 8uring January and ebruary 3113 there were ru!ors about orldCo!'s stability# "n the wake of the Enron scandal, followed by Blobal Crossing, which also declared bankruptcy, there were ongoing *uestions about orldCo!# "n%estors started belie%ing the ru!ors that orldCo! !ight ha%e off7balance7sheet finances and its in%est!ent7grade debt !ight be downgraded to ?2unk@ status# Looking back, all the ru!ors were indeed correct# orldCo!'s new CE) e$plained that ?the entire industry was e$periencing se%ere proble!s which were unprecedented@ and ?while !any co!petitors were e$periencing difficulties and sur%i%ing, !any ha%e gone out of business@# "ndeed the econo!y went into recession during 311., which lead to a fall in re%enues and earnings for all co!panies, !ore so for the teleco! industry# 5he rise of !obile phone culture during the end of .//1s also led to the fall of orldCo!'s re%enues# 5he co!pany was at this point suffering fro! the ego of being a large organi&ation co!bined with a *uality of non7learning attitude for the changes of
consu!er's styles and the neglect to go into !obile phones# ere is a table containing a su!!er of the consolidation financial state!ents fro! ./// to 311.# otice that the cu!ulati%e loss appears to be 9;/ !illion for all three years#
>e%enue et inco!e et inco!e7>E5A5E8 5otal assets Long7ter! 8ebt hareholders' funds "ntangible assets to total assets
./// ;9,/10 3,3/4 3,109 /.,1F3 .F,31/ 9.,3;0 40N
3111 ;/,1/1 3,D10 +D4//0,/1; .F,D/D 99,41/ 4FN
7 in !illions7 311. ;9,.F/ .,41F +.,/F9.1;,/.4 ;1,1;0 9F,/;1 93N
orldCo!'s Consolidated inancial tate!ents Adapted fro!: I#>#K# Chary,3114, +thics in )ccounting$ ,lobal "ases and +xperiences , World"om #nc$' 5he "CA" 6ni%ersity (ress, "ndia, pg# 91
orldCo! has co!!enced its !anipulations right fro! .///, as the co!pany's CE) declared, with the single purpose to obtain desired earnings to boost up stock !arket price#
gradually deducted fro! earnings by depreciation3# "n other words, orldCo! capitali&ed line costs instead of e$pressing i!!ediately and hence a%oided a loss of about F#D billion in the financial state!ents# or se%eral years, in such a way, billions of dollars worth of operating e$penses started to appear in orldCo!'s accounting 6"%" )epreciation K
books as assets# 5he co!pany %iolated the Benerally Accepted Accounting (rinciples +BAA(by treating the operating costs as capital assets and created worthless assets# In$%ead of a conc!u$ion...
"t is astonishing to note how Arthur Andersen could !iss such an ele!entary fraud# "t was !aybe the si!plest fraud that could ha%e been detected easily by anyone who cared to look carefully at the accounts# orldCo! hired Andersen to perfor! a standard audit, <65 not a fraud audit# Although orldCo! fraud was a straightforward lie that would not ha%e been possible without the in%ol%e!ent of the entire group, the fraud could ha%e been !issed# 5o sa%e their skin, Andersen bla!ed ulli%an for withholding infor!ation during the audit# owe%er, when they disco%ered that certain e$penses ha%e been reported as in%est!ent, Andersen i!!ediately announced that their reports on orldCo!'s financial state!ents for 311. should not be relied upon# 6lti!ately, orldCo! "nc# had to go for bankruptcy, which was the biggest bankruptcy in the world# "!!ediately after bankruptcy, .F,111 e!ployees were laid off al!ost 31N of the co!pany's workforce# ulli%an was fired and ulti!ately arrested for the accounting !anipulations# Controller 8a%id Myers was also arrested on the sa!e issue#
Reference$:
Luisa
I#>#K# Chary, +3114-, +thics in )ccounting$ ,lobal "ases and +xperiences, World"om #nc$' 5he "CA" 6ni%ersity (ress, "ndia, pg# 4.79F# 8r# Katerine 5#!ith, 8r#L#Murphy !ith, esults, Earnings (er hare of 1#;F, Co!pared with 1#.1, )perating Margins "!pro%e on >e%enue Mi$ and Merger ynergies 7 Co!pany inancial "nfor!ation, +.///-, at http:GGfindarticles#co!GpGarticlesG!i !16SGis ./// May ;Gai 949304FF, %isited on ednesday, July .0, 311F UUU, Blossary, at www#scottish7newcastle#co!GsnGin%estorGser%icesGglossaryG , %isited on ednesday, July .0, 311F
A**endi@ Wor!dCo8 Inc. and Su-$idiarie$ 1
CONSOLIDATED STATEMENTS O= O(ERATIONS =or %3e %3ree 8on%3$ ended Marc3 1+' +5 and + UNAUDITED' in B 8i!!ion$' e@ce*% *er $3are da%a E@c!udin7 E8-ra%e! ;E=ORE CHANGES
>eported . .//0 Revenue$: Ioice 8ata "nternet "nternational Co!!unication er%ices "nfor!ation technology and
(ro or!a . .//0
.,.D3 4/D ;/3 3;1 3,301 41
>eported . .///
4,F94 .,;14 4F4 3;1 D,FD3 4/1
9,1/9 .,F13 F90 ;9F .,/.3 41;
3
Source> inancial> !C5 WorldCom L +++ Fesults, /arnings #er Share o: $0"3B, Compared ith $0"0, 1perating !argins
5mpro&e on Fe&enue !i@ and !erger Synergies ( Company inancial 5n:ormation, +++, at
http>EE:indarticles"comEpEarticlesEmi m0U6MEis +++ !ay 3Eai A-A28-BB, &isited on Wednesday, July 8, 200B
other To%a! O*era%in7 e@*en$e$: Line costs elling, general and ad!inistrati%e 8epreciation and a!orti&ation To%a! )perating inco!e:
'1,
0'/
5'1+/
.,..F 4F0 3// +'54 43D
;,D1F 3,1.. .,13/ 2'240 D19
;,FDF 3,.;F /D1 2'524 .,49.
O%3er inco8e e@*en$e: "nterest e$pense Miscellaneous "nco!e before inco!e ta$es (ro%ision for inco!e ta$es et inco!e 8istributions on subsidiary trust !andatorily redee!able preferred securities (referred di%idend re*uire!ent et inco!e applicable to co!!on shareholders Earnings per co!!ons share et inco!e applicable to co!!on shareholders:
+.13.3 ;;D .4; ./;
+3FD;3 ;D. .F1 ./.
+3D1.19 .,3/D 99. F49
7 F
.9 F
.D 7
.0D
.D/
F3/
1#.0
1#.1
1#;/
8iluted hares utili&ed in calculations:
1#.0
1#.1
1#;0
.,1.3 .,1F4
.,F44 .,03/
.,040 .,/33
Wor!dCo8 Inc. and Su-$idiarie$ 4 CONSOLIDATED ;ALANCE SHEETS UNAUDITED' in B 8i!!ion$ Re*or%ed' E@c!udin7 E8-ra%e!
March ;., ./// AE5 Current assets: Cash and cash e*ui%alents Accounts recei%able, net )ther current assets 5otal current assets
8ece!ber ;., .//0
30F 9,.DD ;,404 0#/;F
/// 4,0.1 ;,1;. 0#041
(roperty and e*uip!ent, net
./#093
./,39/
Boodwill and other intangibles, net
49,0.9
49,4D0
-
Source> inancial> !C5 WorldCom L +++ Fesults, /arnings #er Share o: $0"3B, Compared ith $0"0, 1perating !argins
5mpro&e on Fe&enue !i@ and !erger Synergies ( Company inancial 5n:ormation, +++, at
http>EE:indarticles"comEpEarticlesEmi m0U6MEis +++ !ay 3Eai A-A28-BB, &isited on Wednesday, July 8, 200B
)ther assets L"A<"L"5"E A8 A>E)L8E>' "IE5ME5 Current liabilities: hort7ter! debt and current !aturities of long7ter! debt )ther current liabilities 5otal current liabilities Long7ter! liabilities, less current portion: Long7ter! debt ote payable E!bratel )ther liabilities 5otal long7ter! liabilities Mandatorily redee!able preferred securities 5otal shareholders' in%est!ent
F,.D1 0.,FD4
D,D3D 01,./;
D,91F .1,1/9 .D,D13
4,D30 /,00D .4,9.4
.3,.0D /3F 4,.10 .F,33.
.4,;49 .,;.9 4,33D ./,00D
F/0
F/0
4F,.4; 0.,FD4
44,//9 01,./;
Additional bibliography:
.oni .$ /oung and 0arcia )nnisette 123345 "ultivating imagination! +thics' education and literature' "ritical 6erspectives on )ccounting )$ "raig 7eller' 7atherine T$ 8mith and 9$ 0urphy 8mith 123345 :o gender' educational level' religiosity' and wor- experience affect the ethical decision;ma-ing of <$8$ accountants?' "ritical 6erspectives on )ccounting' =olume >' #ssue @' 0arch 2334' 6ages 2AA;@>B 7en 0c6hail 1233@5 Celocating accounting and business ethics! reflections on a business ethics retreat in 8cotland*s Dational 6ar-' The &ritish )ccounting Ceview' =olume @E' #ssue B' :ecember 233@' 6ages @BA;@FF 9inda Thorne 1233>5 Cefocusing ethics education in accounting! an examination of accounting students% tendency to use their cognitive moral capability' .ournal of )ccounting +ducation' =olume >A' #ssue 2' 8ummer 233>' 6ages >3@;>>4 8teven 0$ 0intz 1233F5 )ccounting ethics education! #ntegrating reflective learning and virtue ethics' .ournal of )ccounting +ducation' =olume 2B' #ssues 2;@ 0ary ð )rmstrong' .$ +dward 7etz and :wight Gwsen 1233@5 +thics education in accounting! moving toward ethical motivation and ethical behavior' .ournal of )ccounting +ducation' =olume 2>' #ssue >' 6ages >;>F
8iva-umar =elayutham 1233@5 TH+ )""GB' #ssue B' 0ay' 6ages B@;E3@ Teri 8hearer 123325 +thics and accountability! from the for;itself to the for;the; other )ccounting' Grganizations and 8ociety' =olume 24' #ssue F' )ugust' 6ages EB>;E4@ 8tephen +$ 9oeb 1>AAA5 )ccounting ethics research' .ournal of )ccounting and 6ublic 6olicy' =olume >' #ssues B;E' Winter' 6ages @@@;@@B
