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Accounting Fraud At Worldcom

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Accounting Fraud at WorldCom
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Accounting Fraud at WorldCom
1. What are the pressures that lead executives and managers to "cook the books?"
In 1990, the revenue growth was declining the share price at Wall Street was declining.
The share prices reflected the declining earnings of WorldCom. The company was recording low
revenue, and it was not acceptable because the company has started to lose and failed to meet Wall
Street expectations. Hence, due to such pressures, the executives and manager started ordering the
cooking of books.
Ebbers was not happy with the figures, and to institute change and increase the revenue, he
started to put pressure on the employees. Ebbers wanted to see WorldCom as the number one stock
on Wall Street (Romero & Atlas, 2002). His demands were absurd as he ordered the employees to
increase the revenues that concentrated on revenue growth and building capacity to handle the
projected growth. The short-coming of the demands is the long-term cost surpassed the short-term
profits. Ebbers's preference for short-term gains was aimed at increasing the raising the market
value of WorldCom. Ebbers` preference made him push the executives and managers to record an
increase in revenue, and that is how they started cooking the books.
Executives and managers had to come up with ways to have revenue growth. WorldCom
started contracting long-term fixed-rate lease contracts. The leases were to build the company's
network capacity to meet the expected increase in customer demands. The downside for the
strategies is that WorldCom could avoid lease payments and opting to bear the hefty termination
fees. Moreover, if the expected rise in customer demand did not happen, WorldCom would cater
to the line capacity dormant's cost.

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1 Accounting Fraud at WorldCom University Name Student's Name Assignment Title Course Number and Name Professor's Name Date 2 Accounting Fraud at WorldCom 1. What are the pressures that lead executives and managers to "cook the books?" In 1990, the revenue growth was declining the share price at Wall Street was declining. The share prices reflected the declining earnings of WorldCom. The company was recording low revenue, and it was not acceptable because the company has started to lose and failed to meet Wall Street expectations. Hence, due to such pressures, the executives and manager started ordering the cooking of books. Ebbers was not happy with the figures, and to institute change and increase the revenue, he started to put pressure on the employees. Ebbers wanted to see WorldCom as the number one stock on Wall Street (Romero & Atlas, 2002). His demands were absurd as he ordered the employees to increase the revenues that concentrated on revenue growth and building capacity to handle the projected growth. The short-coming of the demands is the long-term cost surpassed the short-term profits. Ebbers's preference for short-term gains was aimed at increasing the raising the market value of WorldCom. Ebbers` preference made him push the executives and managers to record an increase in revenue, and that is how they started cooking the books. Executives and managers had to come up with ways to have revenue growth. WorldCom started contracting long-term fixed-rate lease co ...
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