FAR600 CASE STUDY: SEPT 2011 SEMESTER

(Refer to the attached list of cases and concentrate only on those listed below) Pages 1 & 2 : Capitalizing on oldest trick in book Page 7 Page 8 Page 9 Pages 10 & 11 : WorldCom finds accounting fraud : Former controller comes up more often : WorldComs bad math may date back to 1999 : CFOs join their bosses on the hot seat

I.

Analyze the case and respond to the following questions: (a) (b) (c) Discuss the earnings management techniques employed by the management of WorldCom. In your opinion, why do the managers of WorldCom want to manage their earnings and subsequently be engaged in fraudulent activities? What were the consequences that befell the company upon the discovery of the fraudulent activities? (8 percent)

II.

III.

Discuss in what instances is earnings management acceptable and in what instances is it not acceptable? (1 percent) In your opinion, what are the strategies that the accounting profession can take to curb the abuses in earnings management that subsequently result in fraudulent activities? (1 percent) (Total: 10 percent) END OF QUESTIONS