Financial Fraud Methods Of The Healthsouth Corporate

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Case study There is a famous case of financial fraud, one of the largest outpatient surgery, rehabilitation and diagnostic imaging companies in US, known as HealthSouth corporate. The company had over 1,800 facilities in all 50 states which also happen to be the first scandal by listed companies in US after the Sarbanes-Oxley Act. Two main sections will be discussed from this case. Firstly, to explain the financial fraud methods of the HealthSouth corporate. Secondly, the audit failure of Ernst and Young will be discussed. The company grew quickly between 1980-1990s. The main motive of growth is the acquisition. According to the testimony, if the actual profit fell short of Wall Street’s expectations, the senior accounting personnels were asked to ‘fix the problem’ by convening a meeting to fix the earning shortfall (Voreacos and Davidson, 2005). The HealthSouth corporate used various methods to make fictitious income up to 434 million dollars. The actual profit is only 9 million dollars. The overstated percentage is 4722% in 2011 (Securities and Exchange Commission HealthSouth corporation). The allegedly led by Scrushy , perpetrated a fraud shows that it had grown to 2.7 billion dollars before it was finally coming to light in 2003 ( Ronald, Timothy and Jan, cited in Stuart, 2013). One of the main methods used by the HealthSouth corporate is the contractual adjustment, which is contra-revenue balance. It represents the estimated difference between gross patient billing
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