'Extraordinary Circumstance Review\r'

'Introduction and Aim of the Review This review of WorldCom is ground on the Extraordinary Circumstances by Cynthia Cooper. The point of review report is to conclude whether WorldCom satisfied the calculate of Ethics and the Attri onlye and implementation Standards set onwards by the IIA. Background WorldCom was one of the largest telecom companies in the world during 1996 to 2002. The corporation attended to grow a modest regional troupe that bought and re-sold presbyopic distance in the South into an international behemoth that ope posed in endlesslyyplace 65 countries.However, in 2002, the senior management and employees perpetrated a massive fraud, and in June, WorldCom announced that it had â€Å"misstated” its fiscal statements oer the last five quarters by $3. 8 billion. After coming out this scandal, WorldCom went bankrupt, and it has been the largest bankruptcy ever. compendium Based on the book Cynthia Cooper wrote, WorldCom didn’t comply with the Code of Ethics and the Attribute and Performance Standards. Fraud The internet bubble that burst in March, 2000 is followed with much larger and more devastating die: Telecom.WorldCom’s financial statements were far worse than hope that would result in convey footing fall, downgrading company and most importantlyâ€losing capital to acquire companies. past CEO and CFO were planning to change the financial statements with mid-level accountants. They thought if the financial statements were better in next quarter, they could cover the change. But things didn’t go agree to plan. They had to change the number until the whistle blew. Lack of risks judgement During the WorldCom expansion, CEO, Bernie led the company through 70 acquisitions in less than 20 years.Bernie was too audacious to smash the company without consideration. For example, when board didn’t want to practice any more capital or cause more debt on telecom, Bernie mortgaged everything he had to subvert TMC outright. The strategy helps LDDS expand, but also planted flop in the company which exploded in the future. gaming sort of than risk control When World Com was acquiring separate companies, both(prenominal) were non provideing to feel a combination of cash and variant. They would sell the stocktaking as soon as they get.In order non to let the stock price fall, the executives in WorldCom bought the stock instead at a discount price. Luckily, as the result, the stock price went up dramatically. Low interior Audit surgical incision position Internal analyse department was a dispensable unit in the company and didn’t get high heed during that time. Unlike external counterparts, internal auditors are comm and employees of the companies they audit. Some companies choose to ware only a small, token group, others none at all, and others outsource the situation altogether, sometimes to the same public accounting sure coiffureing the external au dit.Cynthia Cooper was announced to be the director of internal auditing by CEO, Bernie. They probably had some deals under table during CEO fraud. Individual usance and lacking of proficiency LDDS was too big to extradite so many employees reporting to CEO, Bernie directly. Meanwhile, Bernie doesn’t have technical telecom or financial tuition and he was only interested in what he liked and understood. His goal was to make WorldCom to be the none 1 stock on Wall way rather than capture market share or be global which implied the tragedy of WorldCom.He continuously acquired the other companies to make WorldCom bigger and bigger without deep consideration, eve paid the price to lose his confidants. Lack of programs value WorldCom was praised as a â€Å"fast-growth” companyâ€a rate of growth usually achievable only by external acquisition, not organic internal evolution. If WorldCom ever stops acquiring, growth will most believably slow, which will negatively im pact analysts’ ratings and WorldCom’s stock price. The main business in WorldCom is not historical telecom business; instead, it’s a acquiring and resell business.Thus, there were no improvement or clear organic structures in the company. What’s more, WorldCom didn’t have its own wireless network and it only sells wireless service, which would result in loss gross later. Lack of after acquiring seeking WorldCom acquired 65 companies successfully until the failure of acquiring Sprint. Internal auditing department only employed 10 people to superintend the huge company. Not mention to monitor and test the acquired companies. Lack of auditing CEO During the golden period of WorldCom, Bernie obtained bestow from plenty banks which related to the stock price of the company.As long as WorldCom stock stayed higher above a level, banks wouldn’t issue a margin call, requiring Bernie to shine up with the cash to buckle under down large of the l oan to bring the collateral to remain at a certain percent of the loan. As a result, when the stock market fluctuated in 2002, WorldCom stock price went down below the certain level, and the board had to help Bernie to pay the loan, or the stock price will keep falling as the banks lose trust in WorldCom and sell stocks one after another.But at the beginning, there was no one to control Bernie not to borrow money and take that risk to pay marginal call. Conclusion WorldCom was proved to be a big success and a tragedy in the history. Its strategy of expansion through acquiring constantly helped it grow-up to be a top 100 company in the stock market. However, it’s precisely because this â€Å" hazardous” acquiring method let the WorldCom ignore the substructure of operating activities. Investors neglect the cash flow statements rather than totally relied on the equity return.As the internal department, it didn’t play a good role in assurance and consulting activ ities for the acquiring process. Since the department wasn’t take a crap enough attention from the board and was usually influenced by the executives, like CEOâ€Bernie, it was hardly to let them perform well under the Bernie’s control. In this case, Bernie was seen as â€Å"Gods” in WorldCom and there was no one came up with objections, even some will oppose the acquiring, but at last Bernie button up could do what he wants.Even Cynthia found there was a fraud from the bare-ass CEO and CFO after Bernie left WorldCom. It still couldn’t prevent the tragedy Bernie planted before. At the same time, this case also gives a lesson that proponent should be divided rather than central control, and the someone who holds the power should have the enough capability and victor knowledge. ——————————————†[ 2 ]. On knave 52 [ 3 ]. On rapscallion 57 [ 4 ]. On page 77 [ 5 ]. On page 84 [ 6 ]. On page 129 [ 7 ]. On page 175 [ 8 ]. On page 127 [ 9 ]. On page 152 [ 10 ]. On page 172 [ 11 ]. On page 183\r\n'