ACC618 Case Study 2 WorldCom

Name

ACC618: Professional Ethics for the Accountant (FSJ2302A)

Traci West

22nd January, 2023

Case Study: WorldCom

The WorldCom deception and the influence of societal and organizational forces on Betty

Vinson’s behavior require you to explain the part played by cognitive deficits in both cases. WorldCom inflated revenues by wrongly registering line expenses and making other false accounting entries. Ebbers' actions may be influenced by “incrementalism” and “self­serving bias.”

It’s possible that CEO Ebbers won’t realize he’s already on shaky ground after trying to appease

Wall Street. He made unethical choices because he was biased toward protecting his own interests. People become ethically blind for a variety of reasons, including not giving the matter enough thought and being influenced by their surroundings, as discussed by Mintz and Morris (2020). Ebbers' and Sullivan’s actions, I believe, were impacted by the frames in which they were presented. When people make different choices depending on how a topic is posed, this is called “framing” (Mintz & Morris, 2020). Ebbers argued that maintaining moral principles takes a back seat to pleasing investors on Wall Street.

Vinson complied with Ebbers and Sullivan’s demands that he makes fraudulent changes to the books. She said that “social and organizational pressures” caused her to disregard her own sense of right and wrong. Since she was only doing what she was told by her employer, she told herself it wasn’t too bad. Sullivan, as CFO, should have understood better than Vinson what was the correct accounting, as noted by Mintz and Morris (2020).

The disciplinary action taken against Vinson by the SEC was considered “reasonable and in the public interest,” and as a result, it was carried out. What kind of an effect did Vinson’s conduct and WorldCom’s business practices, in general, have on the interest of the public? Despite the fact that the financial reporting contained false information, the general public was under the assumption that the firm was growing throughout this time. Investors and creditors place a large amount of reliance on the financial statements that are supplied by the company in order to make judgments regarding the company. The fraud that was conducted by WorldCom caused investors and creditors to lose both their money and their credibility, which was not in the best interest of the general public as a whole. Belder (n.d.) offered an explanation of how the quality of the

WorldCom board of directors and the committees that it contained had an impact on the possibility that an accounting scandal would emerge. This fraudulent behavior also became one of the catalysts for the passage of the Sarbanes­Oxley Act, which became law in the year 2002 after it was passed into law.

Cynthia Cooper said this in a talk she gave at James Madison University in November

2013: “You don’t have to be a nasty person to make bad decisions.” Give your interpretation of Cooper’s meaning in light of the chapter’s focus on moral and ethical maturation. Cooper likely meant that it is possible for anyone to err while making a choice. It could be motivated by either private or public concerns, and we can’t assume the worst of somebody just because they’ve made some poor choices. People, according to Kohlberg’s research, go through a progression of increasingly complicated and nuanced cognitive stages and moral reasoning processes as they work through ethical challenges (Mintz & Morris, 2020). Despite best intentions, a morally upstanding person may still act unethically when considering all relevant factors.

There are several potential causes of moral ambiguity, which can make it difficult to make moral choices. As Christians, we keep in mind that the appropriate decisions will be informed by our faith in God. The Lord promises in the Bible, “I will lead you in the right direction for your life.

I’ll guide you and keep an eye out for you. Psalm 32:8 (The NET New Translation).

References

Belder, M. (n.d.). Was the WorldCom scandal an effect of its quality of board and committee structure? Beleggershulp. https://beleggershulp.nl/was­the­worldcom­scandal­an­effectofits­quality­of­board­and­committee­structure/

Mintz, S. M., & Morris, R. E. (2020). Ethical obligations and decision­making in accounting: Text and cases (5th ed.). McGraw­Hill Education.

New Living Translation. (2015). New Living Translation. https://www.tyndale.com/nlt/