"Follow the money." That was the mantra of Deep Throat, the mysterious source whom investigative reporters Bob Woodward and Carl Bernstein met in an underground parking garage in their real-life thriller, All the President's Men.

Cynthia Cooper, the internal auditor who unearthed the WorldCom accounting scandal, doesn't record such a refrain in Extraordinary Circumstances, her gripping new book about her investigation. But Cooper's bywords might well have been: "If you don't understand it, and nobody can explain it, keep digging until you find out what it means."

Woodward and Bernstein followed a winding path papered with laundered campaign money that led up through President Richard Nixon's inner circle and ultimately to the Oval Office itself. For her part, Cooper wasn't following money, but information — or, rather, the lack of it. Time and again, as she worked her way through a labyrinth of misplaced accounting entries, she encountered jargon that sounded authoritative, but proved to be completely phony.

It was the kind of empty language that investors at the time had heard from Enron as well, as executives of the energy company tried to justify assetless accounting and bogus special-purpose entities. Indeed, the arrival of Cooper's book is timely: after all, today's economic crisis, too, relied on authoritative smooth-talk that somehow suggested lending to people with bad credit was a low-risk investment. And just as few people questioned the financial underpinnings of the housing bubble, few investors, regulators, or reporters thought to penetrate the accounting smokescreen that WorldCom's executives were putting forth.

"At times, it is a slow, plodding development of facts, checking theories, trying to find connections, and thinking through the issues until you get it right." — Cynthia Cooper, former WorldCom Internal Auditor

Intuitively, Cooper knew better. When an accounting piece of financial reporting didn't make sense to her, she asked about it — even if it meant questioning two of the most powerful executives in the country at the time: Bernie Ebbers, the cigar-chomping, megalomaniacal CEO, and Scott Sullivan, the brilliant, cryptic CFO.

At one point, under pressure from Cooper, Sullivan invoked a "rule of 10" to justify a transaction. That puzzled the internal auditor, who hadn't heard the phrase in any of her accounting classes. So she asked around and found that her skepticism was justified: the phrase is meaningless — except to whist players or gas chromatographers.

More serious was the company's use of another phony term. In the midst of a 2003 audit of WorldCom operations, Cooper and her trusted colleague, Glyn Smith, found differing amounts of capital spending in two overlapping schedules provided by the finance department. One of the finance directors told the auditors that part of the difference could be explained by "prepaid capacity."

Cooper and Smith, having never heard the term before, asked for an explanation. Oddly, the director — who oversaw capital spending — couldn't provide one. His explanation for his ignorance: he got his information from the controller, David Myers.

Rather than going straight to Myers, who along with Sullivan had resisted Cooper's earlier attempts to make sense of the company's ensnarled accounting, she decided to find proof that her mounting skepticism was justified. Methodically, with the help of Gene Morse, a technology whiz she worked with, Cooper traced the amounts of prepaid-capacity entries as they branched swiftly in and out of other accounts for no apparent reason.

When all was said and done, she discovered, the effect was to move large, rounded dollar amounts — a tell-tale sign of fraud — from the income statement to the balance sheet. "It is a spider-web of amounts moving as many as three times and finally spread in small-dollar increments across a multitude of different assets, mostly telecom fiber and equipment," writes Cooper. Her department's painstaking work revealed 49 prepaid-capacity accounts totaling $3.8 billion over five quarters. The movement of those amounts from the income statement to the balance sheet boosted earnings.

Cooper explains that "prepaid capacity" was designed to represent the costs of leasing fiber-optic lines that had fallen out of use in the wake of the telecom bust and produced scant revenue. Instead of booking the costs as lease expenses as they occurred, however, Sullivan and his mates entered the costs as capital assets, allowing them to record the expense over time — as a company normally would for an asset like a building. It was the CFO's way of buying time until wished-for revenue caught up with the misclassified expenses.

Receiving no substantiation for the prepaid capacity from Sullivan and Myers, Cooper decided to follow the trail through accounting. What ensued is the high point of her book, which builds suspense like a crackerjack detective novel. She and Smith go door-to-door up the chain of command. Before their first interview, with accounting manager Betty Vinson, Cooper's hands were shaking. It's no mean feat to turn a well-known story of an internal audit into a thriller, but such small personal details not only encourage readers to identify with Cooper, they also build an exquisite level of tension.

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