Worldcom Accounting Scandal

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  • Hey, have you heard about the WorldCom.inc accounting scandal that happened recently?
  • Hmm? I haven't, please do enlighten me Mr. Cheong
  • The company has inflated assets by as much as $11 billion, leading to 30k lost jobs and $180 billion in losses for investors due to false financial statement reports
  • Wow! That's news to me
  • CEO Bernie Ebbers himself is one of the biggest culprit to this scandal
  • Oh I see, how did they pull off this fraud then?
  • They under reported line costs by capitalizing rather than expensing, and inflated revenues with fake accounting entries
  • Were they caught in the end then?
  • Yes they were caught, WorldCom's internal auditing department uncovered $3.4 billion in fraud
  • As for the penalties?
  • CFO was fired, controller resigned, and the company filed for bankruptcy and Ebbers was sentenced to 25 years for fraud
  • No problem, and sure I'll see you soon Muthu
  • Thanks for keeping me updated Mr Cheong we should really associate outside the office soon
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