ACCT19083 Final Assignment: WorldCom Case Study and Ethical Analysis

This assignment analyzes the ethical and corporate culture failures within WorldCom. It examines whether informed consent was given for accounting adjustments, and if abuse of official position occurred. The analysis highlights the unethical practices of top management, including the CFO and Financial Controller, who instructed mid-level accountants to manipulate financial data to create a misleading financial statement. The assignment explores the negative corporate culture that fostered unethical behavior, leading to financial fraud and the company's eventual bankruptcy. The student uses references to support their arguments, examining concepts like informed consent, abuse of power, and the importance of ethical leadership in preventing such scandals. The document emphasizes the importance of ethical conduct in accounting to ensure accurate financial reporting and maintain stakeholder trust. The student explains the concept of informed consent, the abuse of official position, and the culture of the organization. The assignment also discusses the consequences of these actions, including the destruction of the company's reputation and the legal repercussions for those involved.

ACCT19083 Final Assignment
Term 2, 2017
Student ID: Student name……………………………………………………..
Marker’s overall comments: The markers may include any
final comments here.
Overall Mark (Total) out of 40:
0

Part A Question 1: Did Buddy, Troy, and Betty give informed consent to making the requested accounting
adjustments? Explain your answer. You should also explain the concept of "informed consent" before
answering the question.
Informed consent is when an individual has the decision to do make willingly whether to participate in a particular
action in the organization. In accounting, it is essential to follow international accounting code of ethics to ensure
that there is a smooth flow of operation for the organization (Goetsch & Davis 2014). The act of getting
information to change something in accounting requires a proper evaluation of the effects to the stakeholders and
shareholders of the organization. Adequate information about accounting needs to be considered when making
adjustments to the financial data in the system. The change of expenses or account receivable for a company has
legal consequences to the individual involved as it offers misleading information to the shareholders of the
company. It is essential to state the right amount in accounting to reduce negative consequences of adjusting
accounting figures. Overstating and understating require informed consent from the top management as it affects
the performance of the company (Smith 2017). Incorrect capital expenses by the accountants provide an
inaccurate financial report which is not reliable to the shareholders and stakeholders of the company.
Buddy, Troy, and Betty had the informed consent to adjust the accounts of WorldCom from the Chief Financial
Officer Scott Sullivan and Financial Controller David Myers. This was to make the stakes of the company appear
higher to the stakeholders of the company while the company was experiencing loss. The manual adjustment of
accounts negatively impacted the business as it had to file for bankruptcy from the fraudulent scheme of changing
accounting figures. The accountants were required to reduce the expense to meet the earning expectations of the
company. Manipulation of accounts would provide wrong information to the shareholders of the company
(Zadek, Evans & Pruzan 2013). Buddy, Troy, and Betty were mid-level accounts who were required to take orders
from the top management with the decision being unethical to the operation of the business. Physically adjusting
the financial result would lead to jail terms to the people who were involved in the process. Buddy, Troy, and

Betty were uncomfortable to make the account adjustments as it is not ethical, but they had informed consent
from the top management of the company where they had to follow the stated orders to keep their jobs. Conflict
of interest between the organization management and staff requires being handled through the use of a proper
ethical policy (Bampton & Cowton 2013). Incorrect capital expenses about the company make it hard to identify
the real value of the company making it hard to come up with a valid financial decision.
References:
Bampton, R., & Cowton, C. J. (2013). Taking stock of accounting ethics scholarship: A review of the journal
literature. Journal of Business Ethics, 114(3), 549-563.
Goetsch, D. L., & Davis, S. B. (2014). Quality management for organizational excellence. Upper Saddle River, NJ:
Pearson.
Smith, M. (2017). Research methods in accounting. Sage.
Zadek, S., Evans, R., & Pruzan, P. (2013). Building corporate accountability: Emerging practice in social and ethical
accounting and auditing. Routledge.
Marker’s Comments: The marker will provide feedback here. Mark (5):
0
Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Demonstrates a balanced and very
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
sources.
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible
sources.
Quality of writing at a very high
standard. Paragraphs are
Quality of writing is of a high
standard. Paragraphs are mostly
Quality of writing is of a good
standard. Few grammar, spelling
Some problems with sentence
structure and presentation
Quality of writing is a very poor
standard so barely

Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
coherently connected to each
other. Correct grammar, spelling,
and punctuation.
well structured. Few grammar,
spelling and punctuation mistakes.
and punctuation mistakes. Frequent grammar, punctuation
and spelling mistakes. Use of
inappropriate language.
understandable. Many spelling
mistakes. Little or no evidence of
proofreading.
The assessment presents a
detailed and focused summary of
the ideas presented; drawing clear
and well-thought-out conclusions.
The assessment presents a fairly
detailed and focused summary of
the ideas presented; drawing fairly
clear and well-thought-out
conclusions.
The assessment presents a
somewhat detailed and focused
summary of the ideas presented;
providing some evidence of
conclusions.
The assessment provides limited
detail with no clear summary of the
ideas presented; drawing limited
conclusions.
The assessment fails to provide
any clear evidence of the ideas
presented; drawing no clear
conclusions.

Part A Question 2: Did Scott and David engage in an abuse of their official position? Explain your answer. In your
answer, you should also explain what "abuse of official position" means regarding business ethics.
Scott and David engaged in abuse of official office by asking the mid-level accountants to make adjustments to the
account which is unethical and illegal. Misuse of official position is when a leader offers misleading
orders to the junior staff which is compromising (Drury 2013). Scott was the Chief Financial Officer,
and David was the Financial Controller of WorldCom who offered the adjustment of accounts to
provide a misleading financial statement. The action was risky to the accountants as they have to
reduce million of dollars of expenses to meet the required financial statement of the organization.
This fraudulent scheme was aimed at improving the net profits for the company which was making
losses from business operations. After discovering the scheme, there was the reduction of the value
of company shares. The reputation of the company was destroyed and had to be declared bankrupt
despite the changes of values in the financial statement (Brigham 2014). The accountant was
vulnerable as they had to follow the orders from their bosses Scott and David so that they can keep
their jobs. The situation was unethical, but the accountants had to follow the rules to distort the
accounting figures in the system. The physical changes were done on over hundred million dollars
without any support of making adjustments to the accounts.
The accountants were required to offer the financial reports in a few days to the public by making physical
adjustments to the accounting values. The financial statement provides the company’s position which
is essential in deciding that particular industry. Top managers are required to follow the set company
policy when giving orders to the junior staff to reduce cases of abuse of position. Business ethics
makes it possible for the leaders to delegate actions that will provide a smooth flow of the company
(Rostamzadeh, Govindan, Esmaeili & Sabaghi 2015). The instruction of physically changing financial
led to ethical dilemma to the mid-level accountants. The supervisory role of an organization requires
the use of proper skills and knowledge that are ethical for honest practices in the organization.
Appropriate use of power by top managers improves the morale of other employees as the functions

are highly acceptable in the business environment (Kianto, Ritala, Spender & Vanhala 2014). Ethical
enforcement of regulation in business provides a competitive advantage in the market. Therefore
moral leadership requires the following of set obligation to reduce legal issues from production and
financial reporting.
References:
Brigham, E. F. (2014). Financial management theory and practice. Atlantic Publishers & District.
Drury, C. M. (2013). Management and cost accounting. Springer.
Kianto, A., Ritala, P., Spender, J. C., & Vanhala, M. (2014). The interaction of intellectual capital assets and
knowledge management practices in organizational value creation. Journal of Intellectual Capital, 15(3),
362-375.
Rostamzadeh, R., Govindan, K., Esmaeili, A., & Sabaghi, M. (2015). Application of fuzzy VIKOR for evaluation of
green supply chain management practices. Ecological Indicators, 49, 188-203.
Marker’s Comments: The marker will provide feedback here. Mark (5):
0
Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Demonstrates a balanced and very
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
sources.
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible
sources.
Quality of writing at a very high
standard. Paragraphs are
coherently connected to each
other. Correct grammar, spelling,
and punctuation.
Quality of writing is of a high
standard. Paragraphs are mostly
well structured. Few grammar,
spelling and punctuation mistakes.
Quality of writing is of a good
standard. Few grammar, spelling
and punctuation mistakes.
Some problems with sentence
structure and presentation
Frequent grammar, punctuation
and spelling mistakes. Use of
inappropriate language.
Quality of writing is a very poor
standard so barely
understandable. Many spelling
mistakes. Little or no evidence of
proofreading.

Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
The assessment presents a
detailed and focused summary of
the ideas presented; drawing clear
and well-thought-out conclusions.
The assessment presents a fairly
detailed and focused summary of
the ideas presented; drawing fairly
clear and well-thought-out
conclusions.
The assessment presents a
somewhat detailed and focused
summary of the ideas presented;
providing some evidence of
conclusions.
The assessment provides limited
detail with no clear summary of the
ideas presented; drawing limited
conclusions.
The assessment fails to provide
any clear evidence of the ideas
presented; drawing no clear
conclusions.

Part A Question 3: Based on what you have read in the case study, describe the corporate and ethical culture of
WorldCom. You should then perform some research into WorldCom's culture and explain what others have
reported.
Corporate culture is the behavior of employees in an organization which can be either positive or negative culture
(Guiso, Sapienza & Zingales 2015). It is vital for a team to focus on a positive corporate culture to improve ethic
practices during production. WorldCom had a negative corporate and ethical culture as the top management
lacked the moral leadership to govern daily operations. The CFO of the company Scott Sullivan and Financial
Controller David Myers instructed the accountants to change the number to come up with a desirable financial
report. Moral leadership is required in an organization to handle unethical dilemmas when performing duties
regarding an organization. The adjustments of hundreds of millions of dollars would provide inaccurate financial
report to the report (DeBacker, Heim & Tran 2015). Buddy, Troy, and Betty had to follow the instruction to avoid
being replaced by the organization which would make it hard to meet their daily needs. WorldCom was an
unethical organization as the managed pressured the employees to act unethically to come up improved earnings
of the company. The negative corporate an ethical culture in WorldCom led to lack of teamwork to come up with
a proper decision that will improve the performance of the organization. For a business to succeed the corporate
and ethical culture is required to be positive for a corporate culture that will enhance teamwork and collaboration
for an increased profitability from production (Bebbington, Unerman & O'Dwyer 2014). Employee empowerment
is essential in developing a positive corporate and ethical culture to handle various problems in the organization.
Ethical culture requires the staff to adhere to the commitments to the organization for the achievement of set
personal and corporate goals. The top managers are needed to develop strategies that will ensure an extended
survival of business in the dynamic external environment. The appropriate approach reduces unethical cases such
as manipulation of financial figures in WorldCom. Positive corporate and ethical assures quality financial reporting
to the public (Carroll 2015). Transparency and communication of plans are essential in handling ethic dilemmas in
the company. The actions implemented by the management require considering legal requirements for a

continuous development of the business. Equality is vital in improving the corporate and ethical culture of an
organization to deal with issues facing the company ethically. WorldCom’s corporate and ethical culture requires
modification to reduce unethical accounting during financial reporting. The company is expected to come up with
a code of ethics that will regulate actions of employees and management.
References:
Bebbington, J., Unerman, J., & O'Dwyer, B. (Eds.). (2014). Sustainability accounting and accountability. Routledge.
Carroll, C. E. (Ed.). (2015). The handbook of communication and corporate reputation (Vol. 49). John Wiley & Sons.
DeBacker, J., Heim, B. T., & Tran, A. (2015). Importing corruption culture from overseas: Evidence from corporate
tax evasion in the United States. Journal of Financial Economics, 117(1), 122-138.
Guiso, L., Sapienza, P., & Zingales, L. (2015). The value of corporate culture. Journal of Financial Economics, 117(1),
60-76.
Marker’s Comments: The marker will provide feedback here. Mark (5):
0
Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Demonstrates a balanced and very
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
sources.
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible
sources.
Quality of writing at a very high
standard. Paragraphs are
coherently connected to each
other. Correct grammar, spelling,
and punctuation.
Quality of writing is of a high
standard. Paragraphs are mostly
well structured. Few grammar,
spelling and punctuation mistakes.
Quality of writing is of a good
standard. Few grammar, spelling
and punctuation mistakes.
Some problems with sentence
structure and presentation
Frequent grammar, punctuation
and spelling mistakes. Use of
inappropriate language.
Quality of writing is a very poor
standard so barely
understandable. Many spelling
mistakes. Little or no evidence of
proofreading.
The assessment presents a
detailed and focused summary of
the ideas presented; drawing clear
and well-thought-out conclusions.
The assessment presents a fairly
detailed and focused summary of
the ideas presented; drawing fairly
clear and well-thought-out
The assessment presents a
somewhat detailed and focused
summary of the ideas presented;
providing some evidence of
The assessment provides limited
detail with no clear summary of the
ideas presented; drawing limited
conclusions.
The assessment fails to provide
any clear evidence of the ideas
presented; drawing no clear
conclusions.

Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
conclusions. conclusions.

Part A Question 4: Describe how an institutionalized ethics program might have helped WorldCom at this very
moment (described in the case study). You should explain what a useful ethics program might contain.
WorldCom did not have institutionalized ethic programs which were controlling daily operation of the business.
The Chief Financial Officer and Financial Controller delegated unethical accounting practices to the accountants
which involved adjustment of values in the accounting system physically. Buddy, Troy, and Betty had to
manipulate accounting data so that they can come up with a modified financial report as requires by David, the
financial controller. Lack of ethics code of conducts made it possible for the top managers to manipulate other
staff to doing unethical practices in accounting (Shukeri, Wan-Hussin & Aripin 2015). The accounting entry system
requires regulation by the code of ethics which requires an individual to make changes to accounts entry while
indicating the reason for changing the entry in the system. It is vital for a business to follow the set financial
reporting laws for a proper report that could be used in decision making. The investors consider the financial
report of a company in deciding whether to invest in a particular group thus it is essential for the reports to be
accurate and reliable to the stakeholders. Accounts should have an ethical culture that will reduce illegal activities
in the organization from the practices (Ionescu 2016). WorldCom employees who were involved in manipulation
of accounting data were jailed due to lack of being ethical and not following set laws regarding financial reports.
Institutionalised ethics program requires the employees and management to come up with ethical decisions
which have a positive impact on the performance of the organization (Crane & Matten 2016). The wrong company
accounting led to the wrong statement of operational expenses leading to an overstated profit from the financial
reporting. There was false $3.8 billion of accounting errors which negatively impacted the investors of the
company. The accounting issue led to lay off of over 17,000 employees for the company when it was declared
bankrupt (Hancock, 2002). An institutionalized ethic program would have handled the issues in the company as
the accounting, and other processes of the company would have been ethical following the stated ethic code of
the company. Ethics code in an organization guides the employees and management before coming with a
decision that will affect the performance of an organization. The internal and external stakeholders of the