Ethicality of Accounting Activities

Ethicality of Accounting Activities

World filed for bankruptcy protection after the company admitted to accounting fraud. After rigorous investigations into Workroom’s fraudulent transactions it was discovered that in total they amounted to $11 Billion dollars. Key Activities in the World Case A $500 million entry with no backup or documentation triggered the events that came later and resulted in the downfall of World. Cynthia Cooper Vice President of Internal Audit for World, Gene Morse also a World employee discovered $3. 8 billion in expenses that were allocated incorrectly on Workroom’s books. This was one of the incidents that led Cooper and

Morse to suspect that this multi-million dollar organization was “cooking the books”. According to ‘United States Securities And Exchange Commission Complaint filing” (2002), “From at least as early as 1 999 through the first quarter of 2002, World misled investors. World has admitted that during this period, as a result of undisclosed and improper accounting, it materially overstated the income it reported in its financial statements by approximately 57. 2 billion. In an effort to conceal losses. ” World manipulated their financial by reducing its operating expenses and reclassifying certain operating costs as capital assets.

CPA Code of Professional Conduct The unethical accounting practices that World partook in were unquestionably not in agreement with the CPA Code of Professional Conduct. World violated the CPA Code of Professional Conduct principles by the fraudulent accounting entries that were facilitated by key World personnel resulting in lack of integrity, responsibility, and complete disregard of protecting the publics interest. Internal and External Stakeholders Equitability The equitability of stakeholders involved was affected in many ways. The stakeholders who felt the direct negative impact of these events included:

World personnel, families, customers, investors, creditors, auditors, and the telecommunication industry. Corporations and the accounting profession were additionally equitably affected. There was disgrace and dish-honor brought to those involved along with severe legal ramifications that changed lives forever. Thousands of World employees suffered job loss and huge financial losses when they closed their doors and stock prices fell. Both the internal and external auditors lost their credibility. Investors both big and small, lost millions, retirement plans, and 401 k plans were completely wiped UT.

Ethical and Unethical Accounting Activities The most unethical aspect of the World case is that upper management completely deceived the public and even internal users by failing to book line rental expenses correctly on their books (Mint & Morris, 2011). Line rental expenses were classified as assets on their financial (Mint & Morris, 2011 The unethical practices continued when several individuals including Scott Sullivan, the SCOFF and Arthur Anderson attempted to discourage Ms. Cooper from continuing the internal audit investigation and she refused (Mint &

Morris, 2011 The well thought out scheme made it so the fraudulent accounting entries were buried behind other transactions to make them seem more difficult to correct and more difficult to trace (Mint & Morris, Actions of Ethical and Unethical Key Individuals 201 1). Scott Sullivan Scott Sullivan was a key player in this case as the company’s chief financial officer. Sullivan had a business mind but lacked accounting rationale (Mint & Morris, 2011). Scott Sullivan gave direction to the key accounting staff to enter operating expenses on the books as capital expenses.

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