WorldCom Accounting Fraud and the Law
do) fueled corruption at the company. What is the boundary between earnings smoothings and or earnings management and fraudulent reporting? Certain aspects of GAAP (generally accepted accounting principles) actually worked in favor of WorldCom's desire to make the company seem more profitable than it actually was; for example, line costs had to be estimated as profit given that they were not paid until several months afterward (Kaplan & Kiron, 2007, p.4). Transferring line costs and misstating them as capital expenditures further distorted profits (Kaplan & Kiron, 2007, p.7). But while certain practices which may result in inflation of profits may be acceptable, even necessary, this… Continue Reading...
