Worldcom Case Analysis

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Shiqi Wang ACCT 4456 Professor Steve Jensen September 22, 2015 WorldCom Case Analysis According to the section 301.4 of Sarbanes-Oxley Act of 2002, each audit committee shall establish procedures for complaints regarding accounting, internal accounting control, and auditing matters, and the anonymous complaints regarding questionable accounting or auditing matters. However, in this case, the WorldCom Company did not have the procedures for anonymous complaints, so Cynthia Cooper decided to go over Sullivan’s head and reported her findings to the audit committee. This was a huge gamble for her and was risking her career. Section 406 of the Sarbanes-Oxley Act of 2002 requires the disclosure of the code of ethics for senior financial officers. The commission shall issue rule to adopt a code of ethics, and if not, reasons must be disclosed. Also, section 406 defines “code of ethics” and requires the commission to disclose its changes of the code of ethics. The Sarbanes-Oxley Act was developed after a series of financial fraud events to prevent fraud incidences. In my opinion, Sarbanes-Oxley Act has an effect in preventing fraud incidences from occurring. First, it gains people’s awareness of ethical issues and consequences they will face in a company when they are in an ethical dilemma. Thus, the act provides a guide for the direction of managers’ behavior. Second, not only in the WorldCom case, but also in other financial fraud events that occurred during 2001 and 2002, executives should take main responsibilities without question. Therefore, one of the main points is to clear executives’ responsibilities, such as in evaluating company’s internal control. Also, the act increases the criminal responsibilities for executives and white-collars. However, many company and financiers have an opposite attitude towards the Sarbanes-Oxley Act. They argue that some provisions
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