Andersen says WorldCom work complied with standard

Etherzone

[newsperson999]

Embattled auditor Andersen said on Tuesday its work for WorldCom Inc. (NasdaqNM:WCOM - News), which announced earlier that it had uncovered improper accounting of almost $4 billion in expenses, complied with professional and Securities and Exchange Commission standards.

WorldCom said it uncovered accounting irregularities involving expenses misrecorded as capital expenditures that had inflated its cash flow and the company would have otherwise reported a net loss for 2001 and the first quarter of 2002.

The telecommunications carrier also said it had fired its chief financial officer and accepted the resignation of David Myers as senior vice president and controller.

"The WorldCom CFO did not tell Andersen about the line cost transfers nor did he consult with Andersen about the accounting treatment," Andersen said in a statement. "It is of great concern that important information about line costs was withheld from Andersen auditors by the chief financial officer of WorldCom."

[newsperson999]

Worldcom Fraud News foum here

[gcruse]

WorldCom said it uncovered accounting irregularities involving expenses misrecorded as capital expenditures that had inflated its cash flow and the company would have otherwise reported a net loss for 2001 and the first quarter of 2002.

Correct me if I am wrong, but recording expenses as capital expenditures
has the effect of increasing profits.  This is because capital items are expensed
as they depreciate, not all at once. So their outlay is not an all-at-once
impact on profits.  This overstates profits.  But the money was
spent; whether to be expensed now or later, it was spent.  The impact
on cash flow is the same no matter which way you go.  The cash is
gone.  Or am I missing something?

[mhking]

And we can believe anything Andersen says because.....?? [g]

[APBaer]

The impact on cash flow is the same no matter which way you go. The cash is gone.

Yes, I agree with that analysis.

[TheCPA]

You are correct that how a cost is classified has no effect on total cash flow, except to the extent it affects income taxes. However, I think they mean earnings before interest taxes depreciation and amoritization (EBITDA), which is a proxy for operating cash flows.

[Mike K]

The WorldCom CFO did not tell Andersen about the line cost transfers nor did he consult with Andersen about the accounting treatment," Andersen said in a statement.

So what moron! That's what auditors are for. Review transactions, check data, make accounting recommendations, keep the customer between the lines!

These Andersen people are straight from the clinton war room!

[Digger]

Hey, what they do compared to our government is childs play.

[Hillarys Gate Cult]

Exactly. Anderson is a good dumping ground for their customer's with financial problems. Who's going to believe them?

[spyone]

The accountants are not the issue here. Hello? accountants can be bought by the millions paid in annual fees. My jaw is dropping about this board of directors. This board let former CEO Bernie Ebbers borrow over $100 million from the co. That will never be seen again. Then, six months later, they discover this $3.7 BILLION fraud?? I don't think so. This board of directors is as crooked as they come.
oh well, did you know bernie ebbers owns the biggest cattle ranch in north america? located in the middle of british columbia. bot in the last 3 years, no dought with worldcom money. hundreds of thousands of acres!!!! Bet that's where he can be found right now.

[spetznaz]

These Andersen people are straight from the clinton war room!

Honestly i have to disagree with you. The Anderson guys are EVEN worse than Clinton's cronies because these Anderson guys seem to be so sloppy! The first rule of skimming is to ensure that when you take you do not take too much.....and when you try to cook the books you ensure that the 'cooking' is rare! You do not 'cook the books' using a dep frying pan....you take them to a SUSHI chef!

At least the Clinton guys knew how to cover their behinds!

Most probably the Anderson fellows are drop outs from the school that taught the Clinton guys how to cheat and spin! The Anderson fellows obviously did not pay attention in class (probably too busy thinking of interns).

[John W]

"Andersen says WorldCom work complied with standard"
Yes,the standard of the Clinton Roaring Nineties.

[Methos8]

Regarding the comments in the article that said WorldCom inflated its cash flow.. by misrecording expenses as fixed assets, those cash outflows would be considered investing activities (into "fixed assets" that would provide future benefits to the company) instead of operating.

So basically, they are increasing their operating cash flow. Their actual cash in the bank is the same, its all financial statement presentation. But operating cash flow is used by analysts and others as a measure of a company's "quality of earnings". Hope that helps.

[TheCPA]

Exactly