San Francisco: A staggering corporate scandal erupted when troubled telecommunications company WorldCom disclosed company officials had misstated accounting figures in the amount of $ 3.8 billion.

The affair, disclosed on June 25, could eclipse the scandal of US energy giant Enron, bringing another corporate disaster to the steps of Arthur Andersen auditors, a company already in spotlight on charges of criminal wrongdoing.

According to a statement released by the Clinton, Mississippi-based WorldCom, monies that were actually expenses were booked as capital. This was accomplished outside of generally accepted accounting rules, the company stated.

A proper accounting of those funds, the company said, would have resulted a reduced cash flow of $ 6.3 billion in 2001 and $ 1.4 billion for the first quarter of 2002, meaning the company would have reported a net loss in 2001, and for the first quarter of 2002.

In 2001, WorldCom claimed a $ 1.4 billion in profit and a $ 130 million in profit for the first quarter of 2002. Final numbers for those last five quarters won't be available until another audit is conducted, the company said.

WorldCom's chief financial officer Scott Sullivan and controller David Myers have been sacked, the company said.

The company has notified US securities regulators of the impropriety, WorldCom stated, and has retained an outside law firm to investigate the matter.

WorldCom CEO John Sidgmore said the company's management team was "shocked by these discoveries".

As almost an afterthought, WorldCom also stated in its release disclosing the massive scandal that it was laying off 17,000 employees in a cost-cutting move.