The World scandal was actually brought to light by the internal auditor, Cynthia Cooper. Cooper and her team, Gene Morse and Ugly Smith uncovered the fact that line costs were being transferred to capital accounts. Cooper was originally upped off to the fact that something was amiss when the head of World’s wireless business paid her a vaults, upset that he was loosing $400 million that had been set aside to make up for shortfalls If customers didn’t pay their bills. Scott Sullivan, SCOFF of World, decided the money instead, would be used to boost revenues.

When Cooper began asking the previous auditors (Arthur Anderson) about this, she was brushed off and told they take orders from only Mr.

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. Sullivan. The more Cooper and her team dug into the issue, the more people they found that didn’t know what was going on or didn’t want to talk about it. While Cooper and her team were looking for evidence of what was happening with the capital expenditures, Morse found the amounts Jumping between accounts to make the true nature of the expenditures hard to trace by the auditors.

Eventually Cooper got to the bottom of the Issue and confronted David Myers, the intercooler of World. He admitted that the accounting treatment of the line costs were not correct, but he could get back up if he wanted (yet refused to do so), admitted that there were no accounting standards to back up the entries, and that they shouldn’t have been made to begin with, but were too hard to stop once they began.

The investigation began by Cooper in March 2002, by June 20th, the information of the misstatements were brought to the audit board, and on June 26th 2002, the SEC issued a call fraud suit. The Issue began In 2001 when ‘aggressive’ accounting wasn’t enough to keep the cuisines afloat, and Sullivan directed Myers to take the line costs of fees paid to lease networks from other companies, out of operating expenses, where they belonged, and put them into capital accounts.

This resulted in the costs not hitting the company’s bottom line. The issue began with the false financial reporting, but there was also the problem with the lack of internal financial auditing. Cooper was normally dealing with the internal audit of procedures in order to cut costs, there was not a financial internal audit group at World looking over these entries before it went to the eternal auditors.

In this case, the external auditors had been with Arthur Anderson, a firm that was known to have been Involved In scandals.

The problem happened due to the fact that World did not want to begin to show irony in this was that before Cooper had her report, the SEC asked to see financial information due to the fact that all the other companies that were in the same field as World, were operating at a loss, and they were not. In order to prevent this, there should have been an internal audit group that did not erectly report to Sullivan, the employees that did report to him followed what he said and did not want to rock the boat when questioned about the capital expenditures.

As far as learning from this corruption, I think that management needs to realize that they are accountable for these things, they are not above the law, and they will be figured out. Accountants and auditors alike need to be weary of Just making entries without backup or any reasons for doing them, and they also need to stick to their gut just as Cooper did when she began to sense something wrong.