Essay on MCI Scandal: The Cost of Fraud and Deception

Published: 2023-09-11
Essay on MCI Scandal: The Cost of Fraud and Deception
Type of paper:  Essay
Categories:  Company Business Law Social issue
Pages: 4
Wordcount: 901 words
8 min read


MCI, also known as WorldCom, was a trick design to deceive people. Their big aim was to take the cost of maintaining telecom equipment, which was a period of expense, and they capitalized at it as a fixed asset, depreciating its value expecting to benefits in the future, which never happen. The CEO Bernard Ebbers was convicted of fraud. Part of the employees and suppliers had lost a lot of their money. There was no profit at all since there were insufficient cash flows since the benefit was not real. They also used the Quest to deceive other people, whereby they traded capacity with other telecoms useless to both the market and revenue. He was aware that profit was about to plunge in, as in turn, would the stock price, then used this information to dump a lot of stock to avoid expected losses.

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Why Sar Box happened and how congress approached it, the good, the bad and why 20%

Sar Box happened because it was seen as the best solution in the wake of cooperating accounting scandals at the time of its enactment. Sarbanes-Oxley Act of 2002 was considered the most sweeping financial regulation since the most recent security act of 1934. The Sarbanes-Oxley Act was signed into law by the then-president George Bush. The Act was passed by amazingly uneven votes in both chambers of congress. The Sabines-Oxley act instituted a provision requiring all executives and other topmost leaders in businesses to return all ill-gotten gains to their employers. Between the years 2008 and 2009, Sarbanes-Oxley failed to prevent the financial crisis and the great recession. The turner faults lax law enforcement as the main reason for the financial crisis.

Critical elements discussed and their implications 30%

The financial market was in disarray and lacking confidence in corporate reporting—a very wanting situation for all potential investors and overall trust. The Sarbox was a result of a very long string of significant frauds that had come to light in previous years. Some of them include WorldCom,Quest, and Tyco, which experienced either small or large scams. Many B in stock values was lost to bankruptcy filings. In addition to fraud, the companies stretched the regulations to increase their stock, cash in on stock options in many cases, and leave individuals to experience the losses. Complex laws make it expensive and time-consuming to comply with rules, thereby end up practicing defensive accounting to ward off liability. Another challenge is that congress needs to punish dishonest mistakes, made someone land in court, which sometimes inconveniences the smooth operations of businesses.

Pro's and con's, for example, a significant disadvantage is that is one size fits all and killing small companies 20%

The corporate scheme developed a fictitious sales revenue streams to accomplish massive fraud concealing losses and manufacturing phony income. Sarbox regulations make it difficult for such deception to happen, especially in large companies. The companies do not want WorldCom, and the rules have been effective in preventing it. The Dodd Act an oversight body, public company accounting oversight boare, which police the accounting professionals in business schools and sets auditing standards to ensure equality and fair competition among companies. For instance, equal marketing grounds tend to benefit large companies more than small companies, thereby growing at different rates. All companies undergo the same auditing regulations, which does not consider every company's nature.

Your opinion had that Sar Box existed before the frauds, in particular, MCI and Quest would have been the same 10%

If SarBox had existed before Quest and MCI, they would not be the same as today. MCI would not have been ina position to create illegal tricks to operate in the current market. The company would have received a disappointment in trying to take the cost of maintaining telecom equipment and also miss the opportunity to capitalize on it as an asset and bad days ahead. However, the positive part is the CEO would have escaped the long term sentence. Employees and suppliers would not have lost their money due to active and competent management. Sar Box would have a small impact on Quest since it was a bit cleaver, and it was hard to fully explain it in a note though they traded with some useless telecom companies. The Quest would have advanced over time by keeping the capacity to get revenues and avoid buying size. The company would have avoided monotony of activities such as applying CPA knowledge that saw some executives feel nervous and stopped. The stock price would not have plunged as compared to profit and revenues.

If we had SarBox, why did we need Dodd-Frank too 5%?

Dodd-Frank policies were formed to reduce exposure of the U.S banking system to a recap of the meltdown in 2008, which also impacted banking systems worldwide. Dodd-Frank Act created smooth legislation over the past two years. Bills of regulating the financial services sector and complying with new regulations fall primarily on individual consumers. The Act includes policies that suggest reasonable and proportional charges from the companies to the final consumers. Dodd-Frank Act generally empowers and protects the rights of American consumers through factors such as emergency mortgage relief and expand protection for a high-cost mortgage.


Technologies Affected by Sarbanes-Oxley: From Sarbanes-Oxley to SOCKET. (2015). Sarbanes-Oxley Guide for Finance and Information Technology Professionals, 106-113.

Sarbanes-Oxley Act of 2002. (2015). Accounts Payable and Sarbanes-Oxley, 163-169.

Impact of Sarbanes-Oxley. (2015). Sarbanes-Oxley Guide for Finance and Information Technology Professionals, 95-105.

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