ABSTRACT
The company, originally named Long Distance Discount Service, sold long-distance telephone services to retail customers in Mississippi and surrounding states. The company changed its name to WorldCom in 1995 to reflect its global aspirations. The MCI deal vaulted WorldCom over Sprint into second place in the telecommunications industry. The collapse of the Sprint deal marked the beginning of trouble for Ebbers and WorldCom. The WorldCom’s largest expense was “line costs.” Line costs are the amounts paid to other phone companies to carry some portion of a WorldCom customer’s call. The WorldCom accountants began capitalizing line costs as additions to WorldCom’s property and equipment instead of reporting the costs as operating expenses. The adjusting journal entries made by Betty Vinson and Troy Normand at WorldCom’s headquarters created a dilemma for the property accounting group in Tulsa, Oklahoma who kept the detailed records of WorldCom’s fixed assets. The worldCom’s internal auditors acted more as internal consultants than corporate policemen.
