WorldCom Fraud Case

In 1983, a small coffee shop in Hattiesburg, Michigan, Bernard Ebbers developed a business concept. This eventually became the world second largest long distance telephone company WorldCom (Romar and Calkins). In 2002, a company that grew from the beginning of Bernard Ebbers announced the biggest bankruptcy in the history of the United States. The unethical and illegal accounting process involving WorldCom eventually led to a new company called MCI born from the collapse of the company and the ruins of WorldCom.

WorldCom's accounting fraud case is an example of the fraud that may occur within an enterprise and the impact of fraud on organizations, employees, and investors. The success of Berkshire Hathaway depends on the aggressive due diligence practice and the ability to make profitable investment decisions through a sincere organization. Berkshire Hathaway invests in suspicious organizations by combining due diligence practices such as analyzing auditor's qualifications, compliance with investment partners' cooperation, internal control of investees and review of division of duties, oversight of collective thinking, Can be avoided. . These programs create a powerful system to protect Berkshire Hathaway from fraudulent organizations. The management team at Berkshire Hathaway should investigate the costs and benefits associated with strengthening the risk assessment process and decide whether they can be successfully integrated into company procedures.

This report briefly introduces WorldCom and the telecommunications industry and then explains to Berkshire Hathaway, Inc about WorldCom accounting fraud in detail. We provide advice to reduce future loss caused by investment in fraudulent enterprises. We want the management to better understand the investment with high risk of fraud and make more wise investment decisions. Advice to Berkshire Hathaway includes improving current risk assessment procedures and strengthening investment policies

The purpose of this report is to investigate and discuss WorldCom accounting fraud in order to recommend improvement to the Berkshire Hathaway management to avoid investing in fraudulent companies. Accounting fraud is a crime committed by an organization's senior employee to manipulate the organization's financial statements and intentionally hide the company's performance. Fraud is executed without the owner (shareholders and investors) knowingly. This may benefit fraudsters and may adversely affect owners.