Homework: FRAUD CASEBOOK
MCI WorldCom
Read the following articles or other related articles regarding the MCI WorldCom case and then answer the questions below:
Sources:
Zabihollah Rezaee and Richard Riley, Financial Statement Fraud: Prevention and Detection (Wiley, 2010), "MCI: The Fraud That WorldCom Acquired," pp. 216-17.
Neil Weinberg, "Aggressive Accounting: Ring of Thieves," Forbes.com, June 10, 2002.
Mike Celizic, "White Collar Ex-con: Jail Looms for Mortgage Execs," MSNBC, October 8, 2008.
For a more complete description of these events, see Pavlo, Walter, Jr., and Neil Weinberg, "Stolen without a Gun: Confessions from Inside History's Biggest Accounting Fraud - the Collapse of MCI WorldCom," Etika, 2007.
Short Answer Questions
• How much cash did Mr. Pavlo steal in six months?
• What was the accounting inadequacy at MCI that Mr. Pavlo faced?
• At least how many financial reporting (accounting) schemes did Mr. Pavlo use for the MCI collection problem?
• What opportunity did Mr. Pavlo perceive would allow him to perpetrate his fraud and get away with it?
• How much time did Mr. Pavlo spend in prison?
• Who were Mr. Pavlo's unintended victims?
Discussion Questions
• From the excerpt and article, describe the rationalizations used by Mr. Pavlo.
• Given that Mr. Pavlo's fraud was restricted to an accounts receivable embezzlement scheme, what symptoms might auditors observe?
• Given that Mr. Pavlo's fraud was restricted to an accounts receivable embezzlement scheme but was buried among legitimate accounts receivable transactions, describe the three most effective data extraction and analysis tests (using IDEA, Picalo, or ACL) for accounts receivable that you believe would identify this fraud and state why you believe them to be effective. (Limit your answer to no more than one page.)
Format your homework according to the give formatting requirements:
• The answer must be using Times New Roman font (size 12), double spaced, typed, with one-inch margins on all sides.
• The response also includes a cover page containing the student's name, the title of the homework, the course title, and the date. The cover page is not included in the required page length.
• Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.