Accounting Fraud There Are Numerous Term Paper

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But these bills were not received and paid for several months since these costs were incurred, while accounting principles required that the company made such payment estimations that were supposed to be matched by the revenues in the income statements. Therefore, the CFO told its subordinates to release accruals that were considered too high.

The CFOs of some of the units of WorldCom refused to book such entries. Regardless of the CFOs repeated pressure, they refused to book these illegal entries. However, Sullivan managed to book his entries with the help of other managers that obtained the account number and determined subordinates to make the entry. In addition to this, some of the accounting department's employees made accrual releases without informing the senior managers.

This situation was established as a regular practice at WorldCom. The company's accountants also took part in this situation. This is because they accepted to release accruals that were not in accordance with the real situation. Instead, the accountants should have reported this to their superiors. They also could have refused to book such entries. However, even of the accountants would have refused the order of the CFO regarding the release of accruals, Sullivan would have found certain strategies to impose his decision. Therefore, it is not quite fair to put the blame on the company's accountants for this situation.

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Employees' whistle blowing in this situation is intended to ensure the application of ethical standards within the company. This action is encouraged by several regulations in the field. However, most employees do not have the courage to do so. In addition to this, the corporate culture at WorldCom completely discouraged such actions, given the fact that employees were not encouraged to discuss their superiors' decisions, the strategies developed and implemented by the company's management, they were not encouraged to complain about the work environment. Therefore, it is only natural that employees at WorldCom felt reluctant about whistle blowing, even if this would have helped in the fraud case.

The corporate fraud scandals significantly affect the creditability of the accounting profession. This is because people that have little information about what really takes place in the situation of each company assume that the fraud is committed only with the help of accountants. Then, they generalize and expand their biased opinion regarding such practices to the entire accounting profession and its members. This creates false opinions on this profession. In certain cases, such opinions affect the work of these professionals and the opinion on their companies.

Reference list:

1. Kaplan, R. & Kiron, D. (2008). Accounting Fraud….....

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"Accounting Fraud There Are Numerous" (2011, January 30) Retrieved June 4, 2026, from
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