Scandal Of Worldcom Scandal

WorldCom scandal is also worth mentioning. The company, which announced its bankruptcy six months after Enron 's bankruptcy, is considered to be the largest of its kind, being the consequence of accounting manipulation.

A company which was a provider of long distance phone services, was established in 1983 and quickly grew to become the third largest telecommunication company in the United States. In 1985, Bernard Ebbers was appointed a president of a company which shortly after became publicly traded. Six years later, the company name has changed from LDDS to WorldCom and from that point the company was evolving considerably. In November 1997, WorldCom and the MCI Communications merged and MCI WorldCom was renamed simply to "WorldCom” [Ashraf, (2011)].

At its best period, the WorldCom’s stock prices were above $64 per share. However, when fraudulent financial reporting was eventually uncovered, steady growth and company profits stopped.

At the beginning of 2002, during an internal audit, it was discovered that WorldCom had made several transfers that violated generally accepted accounting principles. In March 2002, the Securities Ex-change Commission asked WorldCom for documentation of these transfers. It was discovered that in 2001 and in the first quarter of 2002 WorldCom incorrectly accounted for $3.8 billion in expenses. $3.055 billions of cash flow in 2001 and $ 797 million in the following year shoud have been removed from the books, which company reported for that