WorldCom accounting scandal grows

WorldCom’s accounting scandal is nearly twice as severe as previously thought, the company announced late yesterday.

In conducting the internal audit into the improper accounting methods that led to its bankruptcy filing, WorldCom discovered an additional $3.3 billion in improperly recorded earnings before interest, taxes, depreciation and amortization (EBITDA) for 1999 through the first quarter of 2002. This comes on top of the $3.8 billion in overstated EBITDA the company recorded in 2001 and first quarter 2002 that had already been announced.

“The majority of this has to do with reserve accounts,” said a spokeswoman for WorldCom.

As a result of the discovery, WorldCom said it will be forced to restate its financial reports for 2000. The company already had plans to restate 2001 and 2002.

The company’s accounting problems now total $7.1 billion and could grow even more as its audit continues.

While disheartening, the announcement should have only psychological effects on the market. The company has already declared bankruptcy. The stock market has written the company off, and since its shares are not being traded, it would be impossible for WorldCom to drive the market down directly.