Accounting Fraud At WorldCom Case Solution

The fraud was carried out in two ways:

1. By treating line costs (major expense) as the capital expense on the balance sheet rather than expensing them properly. This resulted in underreporting of the cost.

2. Secondly, the company showed inflated revenues by carrying out fake accounting entries. They managed to show reduced line cost by releasing accruals.  

2. Analysis

The corporate environment in WorldCom was based on respecting and following the senior’s decision without questioning. The growth target set by the top management was overly ambitious and aggressive, which was not feasible in ongoing economic conditions and, therefore, required its employees to take up illegal and unethical practices to achieve them. Lastly, unauthorized personnel had access to accounting data entry, which allowed room for manipulation of information.