Ethicality of Accounting Activities

Ethicality of Accounting Activities

Worldcom was a telecommunications company that merged with MCI in 1997 and was renamed MCI Worldcom. Worldcom was the United States second largest long distance phone carrier, until the accounting scandal in 2002. In 2002, a lady named Cynthia Cooper found discrepancies in their accounting. Someone was cooking the books by moving money around and recording it in places it should not be.

The main accounting activities involved in the Worldcom case are auditing. If it was not for Cynthia Cooper reading an article “Accounting for Anguish” that was written in the Fort Worth Weekly on May 16, 2002, about a former financial analyst with the company they would never have found the fraud that Worldcom was doing. After she read this article Glyn Smith suggested they do an internal audit immediately (Mintz & Morris, 2011).

The AICPA Code of Professional Conduct is to keep CPA’s responsible for their actions they take. They need to be honest, have integrity, and stay objective. In the case of Worldcom, the CPA’s did not stay to the AICPA rules of conduct. The CEO or CFO did not let an accountant know what they were doing with the funds, and this made the accountants lie on their financial statements. This is why a business needs to be audited every few months, it helps to see if a company is following the rules and doing what they need to do.

Using financial statements for a business will tell them what is coming in, if there is any money missing, and how much money the company is putting out. Financial statements will also prove if the business will stay afloat or will go bankrupt. Worldcom wanted to make more money and stay afloat so they cooked their books to make it look like they ...

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... unethical when he did not believe Cooper when she had the proof there was something wrong. He would rather ignore it than deal with it. Once she got a higher up boss involved he decided to do the ethical thing and deal with what was happening to the business. If it was not for her actions it could have been worse for the stakeholders who were investing their money into the business.

When Cynthia Cooper decided to look into why Worldcom books were showing why two accounts disagreed on the amounts, I do not think she realized how big of a problem they had at the time. If every company had someone like Cynthia Cooper I do not think they would go bankrupt or cheat other stakeholders.

References:

Mintz, S. M., & Morris, R. E. (2011). Ethical obligations and decision making in accounting. (2nd ed.). New York, NY: McGraw-Hill/Irwin.

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