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1、ACCT6007:1WorldComJingjingHE311087590,JunYIN310072182,YueZHENG311041094,HuiyanYING310098475,ChengyiLI311047998&ShayneSHEPHERD309181313Acct6007:ContemporaryIssuesinAuditingSemesterOne2012WorldcomCase11/11ACCT6007:1WorldComJingjingHE311087590,JunYIN310072182,YueZHENG311041094,HuiyanYING310098475,Ch
2、engyiLI311047998&ShayneSHEPHERD309181313WorldComInc.(“WorldCom”)wasaUSAlistedcompanythatfiledforbankruptcyin2002.WorldComwasoneoftheworld’slargesttelecommunicationscompanies,withapeakmarketcapitalisationin1999ofapproximately$180Billiondollars(UnitedStatesSecurities&ExchangeCommissionv.Ebbers,2005
3、).Atthetimeofitsfailure,itwasthelargestbankruptcytheworldhadseen(Boyd,2003;Clarke&Dean,2007;Giroux,2008).ThiscasestudyinvestigatesandanalysesthekeyauditissuesandeventsthatwereinvolvedinthedemiseofWorldCom.TheanalysisbeginswiththebackgroundofWorldCombeforeevaluatingtheissuesofDominantSeniorManagem
4、ent(DSM),WeakInternalControls(IC’s),AuditorIndependenceandpooroversightbytheBoardofDirectors(BoD)thatledtothe$11BillionMaterialAccountingMisstatements(MAM)(Clarke&Dean,2007).Thecasestudyconcludeswithhowtheseeventsandissueshaveshapedtheauditenvironmenttoday.WorldCombeganasalongdistancetelephonepro
5、viderbasedinMississippiin1983(Lyke&Jickling,2002).Thecompanygrewaggressivelythroughmorethan65mergersandacquisitionsuntilitsdemisein2002(Eichenwald,2002).Lyke&Jickling(2002)describedthetelecommunicationsindustry’sfundamentalproblemasanoversupplyofcapacityinthe1990’sasmarketparticipantsinvestedinin
6、frastructurebasedonaggressivedemandprojections.ThedisappointingreturnsontheseinvestmentsandacquisitionsputpressureonWorldCom.Between1999and2002WorldCommade$11Billionworthoffraudulentmisstatements.InJuly2002WorldComappliedforChapter11bankruptcy(Romar&Calkins,2006;Lyke&Jickling,2002).Anumberofsenio
7、rexecutivesincludingtheCEO(BernieEbbers)andCFO(ScottSullivan)werefoundguiltyofthefrauds.WorldCom’sauditorhowever,ArthurAnderson(AA),completeda$65MilliondollarsettlementinrelationtoWorldComwhileadmittingnofaultforthefra
