Behind Closed Doors
Behind Closed Doors at WorldCom: 2001
Zekany, Kay E;Braun, Lucas W;Warder, Zachary T
Issues in Accounting Education; Feb 2004; 19, 1; ProQuest Central pg. 101
Behind Closed Doors at WorldCom: 2001
Kay E. Zekany, Lucas W. Braun, and Zachary T. Warder
ABSTRACT: WorldCom was a large telecom company that enjoyed an almost meteoric rise during the 1990s but ran into trouble in the early 2000s. 2001 was particularly difficult. This case gives future generations of accountants the opportunity to study the largest accounting scandal in history from an internal financial accounting perspective.
To the extent possible, this case uses the actual "voices" of participants to gain an understanding of their viewpoints and motives. We get a chance …show more content…
[I]n the fall of 2000, Mr. Ebbers assigned to the Internal Audit Department responsibility for generating the ERP, which was a compilation of schedules and trend analyses for tracking orders, activations, disconnections, and cancellations received by the Company from its customers each month, and estimating the Company 's revenues associated with those orders.
The reporting package was purely operational in nature and had no audit purpose or use, but enabled senior Management, and Mr. Ebbers in particular, to track on a monthly basis increases or decreases in orders placed with the Company by its customers and potential swings in revenue associated with those orders.
The production of the ERP was time-intensive, consuming most of the time of Internal
Audit 's staff for at least the first six months of its inception. This effort drained scarce departmental resources and delayed scheduled audits. Internal Audit 's staff indicated that, at times, they would work on ERP during the day and stay late into the evening to perform the audit functions they were unable to perform during the day. The use of Internal Audit for the ERP was reportedly defended by Ms. Cooper to a complaining staff member as an important effort that added …show more content…
Further reproduction prohibited without permission.
Ill
Behind Closed Doors at WorldCom: 2001
revenue stream because it believed that the future revenues would be matched up with these costs.
These commitments were entered into as the result of customers for which services would he rendered and the lease commitments were entered into to expedite the customer provisioning and revenue stream in accordance with SAB 101, and as further supplemented by FASB 91, direct and indirect costs associated with obtaining a customer may be deferred and amortized over the revenue stream associated with that contract.
Subsequent to the asset being put into service, the Company continued to incur costs associated with network lease commitments as noted above. The portion of these commitments that were not being utilized was deferred until the related benefit (i.e., revenues) was generated. At the time of the cost deferral, management had determined that future economic benefit would he derived from these contractual commitments as the revenues from these service offerings reached
projected
Zekany, Kay E;Braun, Lucas W;Warder, Zachary T
Issues in Accounting Education; Feb 2004; 19, 1; ProQuest Central pg. 101
Behind Closed Doors at WorldCom: 2001
Kay E. Zekany, Lucas W. Braun, and Zachary T. Warder
ABSTRACT: WorldCom was a large telecom company that enjoyed an almost meteoric rise during the 1990s but ran into trouble in the early 2000s. 2001 was particularly difficult. This case gives future generations of accountants the opportunity to study the largest accounting scandal in history from an internal financial accounting perspective.
To the extent possible, this case uses the actual "voices" of participants to gain an understanding of their viewpoints and motives. We get a chance …show more content…
[I]n the fall of 2000, Mr. Ebbers assigned to the Internal Audit Department responsibility for generating the ERP, which was a compilation of schedules and trend analyses for tracking orders, activations, disconnections, and cancellations received by the Company from its customers each month, and estimating the Company 's revenues associated with those orders.
The reporting package was purely operational in nature and had no audit purpose or use, but enabled senior Management, and Mr. Ebbers in particular, to track on a monthly basis increases or decreases in orders placed with the Company by its customers and potential swings in revenue associated with those orders.
The production of the ERP was time-intensive, consuming most of the time of Internal
Audit 's staff for at least the first six months of its inception. This effort drained scarce departmental resources and delayed scheduled audits. Internal Audit 's staff indicated that, at times, they would work on ERP during the day and stay late into the evening to perform the audit functions they were unable to perform during the day. The use of Internal Audit for the ERP was reportedly defended by Ms. Cooper to a complaining staff member as an important effort that added …show more content…
Further reproduction prohibited without permission.
Ill
Behind Closed Doors at WorldCom: 2001
revenue stream because it believed that the future revenues would be matched up with these costs.
These commitments were entered into as the result of customers for which services would he rendered and the lease commitments were entered into to expedite the customer provisioning and revenue stream in accordance with SAB 101, and as further supplemented by FASB 91, direct and indirect costs associated with obtaining a customer may be deferred and amortized over the revenue stream associated with that contract.
Subsequent to the asset being put into service, the Company continued to incur costs associated with network lease commitments as noted above. The portion of these commitments that were not being utilized was deferred until the related benefit (i.e., revenues) was generated. At the time of the cost deferral, management had determined that future economic benefit would he derived from these contractual commitments as the revenues from these service offerings reached
projected