Question

WorldCom committed financial fraud around the turn of the century. Explain the nature of its fraud, and why this fraud is so brilliant (from a fraudster's point of view). Hint: compare WorldCom's fraud method with a separate fraud of creating fictious revenues

Answer 1

It is a financial fraud to an amount of $3.3 Billion as they manupulated the financial figures.

Two main things were done to made this fraud

1.Revenue items in Cost are not recorded instead capitalized the cost.

2.Overstated revenue from operations by creating bogus bills.

Importance to be understood from fruadstrs point:

1.He created all dummy invoices generally all Authorities will not go beyond documented information.

2.Reserves are created so that the Amount from dummy Invoices are in reserves and not in current Bank Balance.

3.He made a claim that reserves will be used in future projects.

4.He made payment to all shareholders so that they will be happy with dividend and will permit accumulation of reserves.