WorldcomAccountingFraud-世通财务造假案例预案.pptxVIP

ACCOUNTING FRAUD AT WORLDCOM ;WorldCom Overview;;Financial Highlights;Definition : Accounting fraud is the intentional misrepresentation of financial statements in order to obtain wrongfully an advantage, retain a benefit, or avoid a detriment ;Pressure to “cook the book” a) The growing pace of income is generally slowing down b) Driven by interests (political interest like personal fame and image in the public, economical interest );Typical methods to “cook the book” Cost of assets Inventory is not real Fixed asset is fake Unreal liabilities Accounts payables is overvalued Accrued expenses are not real Inflated income;Difference between earning smoothing and accounting fraud Consistency Matching Conservatism choosing of accounting item ;What did WorldCom do : Accounting fraud in two method: improper release of accruals improper capitalization of operating expense;Problems (Internal);Failure to acquire Sprint The poor performance;employees should not question their superiors there is no written policies. Each department had its own rules ;legal function was less influential and less welcome than in a healthy corporate environment The corporate governance structure is so complicated Information is not consolidated ; 50% of nonexecutive members No regular communication Decisions not based on the interest of shareholders, but personal interests. ;Problems (External);Formerly big five ;Fast growing sales revenue;Testing information accuracy rather than comparable tests Changed the rating from high risk according to software to moderate risk;NASDAQ stock price from 1994 to 2008 ;Impact of the accounting fraud ;Fall of WorldCom ;Board of director 12 director agreed to pay a total of $25m to settle securities class action case Investment Bankers :settlement of security class action Citi Group $2.6 billion JP Morgan $ 2.0 B Other $ 1.4B Grubman and Soloman Brother Securities Analyst fined $15M and