Case Study: Healthsouth Corporation Scandal

1512 Words Oct 24th, 2012 7 Pages
Anna James
Case Study: HealthSouth Corporation Scandal
Week3
Forensic Accounting: Ethics and Legal Environment
Professor Erskine Hawkins











HealthSouth Corporation is a large, public healthcare company that operates 93 inpatient rehabilitation hospital, 49 outpatient rehabilitation satellites, six long-term acute care hospitals, and 25 home health agencies. According to the company websites, it is “one of the nation’s largest healthcare providers specializing in rehabilitation”.5 The company headquarter is based in Birmingham, Alabama with operation in 26 states across the country and in Puerto Rico.
HealthSouth’s stock trades on the New York Stock Exchange (NYSE) under the ticker symbol HLS, it “closing price as of December 15
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Some of staff of the company including the “CFO at the time William Owens was a past employee of Ernst and Young”4, this question the independence of the auditing firm when analyzing either the malpractices cooked by the company were accepted based on the fact it is from their former mates without closely looking at their contents or they simply had a blind eye by trusting the accounts without proper cautious, which result in negligent on their part. The discovery of the fraud resulted in a loss of reputation for the company and loss of $ 2.5 billion. Lack of adequate information also played a minor problem in the fraud not been discover earlier than it should have been because when an employee of the company had written to the auditor about questionable issues, which the auditors brought up with the management but were not provided adequate information for them to suspect any wrong doing.
The introduction of Sarbanes-Oxley Act of 2002, which requires a sworn certification by company CEOs that the financial statements contained “no untrue statement of a material fact” led to Scrushy agreement to stop inflating earnings. The aftermath of the fraud that took…

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