The Healthsouth Fraud And Internal And External Audit Failure

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The HealthSouth Fraud: An In-Depth Analysis of the Fraudulent Activities and the Internal and External Audit Failure HealthSouth Corporation is one of the U.S.?s largest healthcare companies and is the biggest owner and operator of inpatient rehabilitative hospitals. The present CEO, Richard Scrushy, founded this Fortune 500 company in 1984. It expanded tremendously in the 1990s and received most of its revenue through Medicare. By 1993, it became the largest rehabilitation services company. However by the late 1990s, the company suffered from changes in Medicare policy, decreasing their revenues dramatically. By 2002, the company was starting to face financial issues and Scrushy temporarily resigned as CEO (Soltani 263). Stock prices responded to the news and dropped precipitously. Then in 2003, HealthSouth was charged with Medicare fraud and falsification of its earnings, internal control defilements, fraud, and ?cooking the books? (Soltani 263). Specifically, the SEC stated in 2003 that since 1999, HealthSouth misstated its earnings upward by at a minimum $1.4 billion. The corporation was the first one charged under the Sarbanes-Oxley Act of 2002. Overall, this paper will discuss the mechanisms of the fraud and the accounting methods used to commit the fraud. Also, this paper will examine the audit failure of the external auditor, Ernst & Young (EY), HealthSouth Corporation?s audit committee, and HealthSouth Corporation?s internal auditor function. In 2005,
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