Case | HBS Case Collection | April 2004 (Revised September 2007)

Accounting Fraud at WorldCom

by Robert S. Kaplan and David Kiron


The principal players in WorldCom's accounting fraud included CFO Scott Sullivan, the General Accounting and Internal Audit departments, external auditor Arthur Andersen, and the board of directors. The case provides sufficient detail to allow for a full discussion of the pressures that lead executives and managers to "cook the books," the boundary between earnings smoothing or management and fraudulent reporting, the role for internal control systems and internal audit to prevent or rapidly detect accounting fraud, the expectations about governance processes performed by external auditors and the board of directors, and the pressure and consequences when middle managers follow orders that they know are wrong. Written from the public record, the case contains numerous quotes from an individual involved in the WorldCom fraud that were reported by the Investigative Committee and Wall Street Journal articles about several of the individuals caught up in the situation.

Keywords: Governance Controls; Governing and Advisory Boards; Crime and Corruption; Ethics; Financial Reporting; Organizational Culture; Corporate Governance; Accounting Audits;


Kaplan, Robert S., and David Kiron. "Accounting Fraud at WorldCom." Harvard Business School Case 104-071, April 2004. (Revised September 2007.)