Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

6. Internal Controls and Reporting Cash

Fraud and the Fraud Triangle

Financial Accounting

6. Internal Controls and Reporting Cash

Fraud and the Fraud Triangle

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Multiple Choice

Which of the following was one of the major fraudulent accounting practices that contributed to the WorldCom scandal?

Capitalizing operating expenses as assets

Understating accounts payable to reduce liabilities

Overstating cash balances by double-counting deposits

Recording fictitious sales revenue

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Verified step by step guidance

Understand the context of the WorldCom scandal: It was one of the largest accounting frauds in history, where the company manipulated its financial statements to appear more profitable than it actually was.

Review the concept of capitalizing operating expenses: Normally, operating expenses are recorded as expenses in the income statement. However, fraudulent practices may involve recording these expenses as assets on the balance sheet to inflate profits.

Analyze the other options provided: Understating accounts payable reduces liabilities, overstating cash balances inflates assets, and recording fictitious sales revenue inflates income. These are examples of fraudulent practices but are not the specific method used in the WorldCom scandal.

Focus on the correct answer: The major fraudulent accounting practice in the WorldCom scandal was capitalizing operating expenses as assets. This allowed the company to avoid recognizing these expenses in the income statement, artificially inflating profits.

Conclude by emphasizing the importance of ethical accounting practices and adherence to Generally Accepted Accounting Principles (GAAP) to prevent such scandals.