WorldCom Inc. collapsed and went into bankruptcy in 2002, following revelations of an $11 billion accounting fraud that included pressure by top executives on subordinates to inflate numbers to make the company seem more profitable.

What was Enron doing wrong?

The Enron scandal drew attention to accounting and corporate fraud as its shareholders lost $74 billion in the four years leading up to its bankruptcy, and its employees lost billions in pension benefits.

How did WorldCom make money?

To hide its falling profitability, WorldCom inflated net income and cash flow by recording expenses as investments. By capitalizing expenses, it exaggerated profits by around $3 billion in 2001 and $797 million in Q1 2002, reporting a profit of $1.4 billion instead of a net loss.

How long did Arthur Andersen audit WorldCom?

NEW YORK (CNN/Money) — WorldCom’s CEO lashed out Monday against Arthur Andersen, the auditor that for 15 months signed off on the telecom company’s overstated profit reports.

Who was the CEO of WorldCom when it failed?

When WorldCom, the telecommunications giant, failed and was put into bankruptcy, the U.S. witnessed one of the largest accounting frauds in history. Former CEO, Bernie Ebbers, 63, was convicted of orchestrating this US$11 billion accounting fraud and was sentenced to 25 years in prison on July 13, 2005.

What was the impact of WorldCom’s collapse?

WorldCom’s collapse has already reverberated through jittery financial markets, and is likely to be felt in the wider economy, with banks, suppliers and other telephone companies devising strategies to contain their exposure. WorldCom, built through rapid acquisitions, accumulated $41 billion in debts.

What was the date WorldCom went into bankruptcy?

Aug 19, 2005 7:00 AM PT. When WorldCom, the telecommunications giant, failed and was put into bankruptcy, the U.S. witnessed one of the largest accounting frauds in history.

Who was involved in the WorldCom accounting scandal?

Consequences. In June 2002, WorldCom confessed to nearly $4 billion in accounting wrongdoings, and on July 22, 2002, the company filed for bankruptcy—one of the biggest in American history. The bankruptcy filing led to an increase of scrutiny for the company’s executives and prompted legal investigations into WorldCom CEO Bernard Ebbers …