2 what should healthsouth s auditors ernst young have done if they had perceived these flaws

In Maythe U. On the same day, Scrushy exercised 5. Scrushy, however, appears to have been the common link among the corporations involved.

Lending Banks AmSouth Introduction Some of the most troubling issues surrounding HealthSouth include its dealings with its auditors Ernst and Young, its tax accountants KPMG, its loan bankers, its investment bankers and the stock analysts who advise the market.

The question is whether those in these powerful and influential groups knew of the fraud? Did they choose to look past it because they did so much business with HealthSouth and associated companies?

Scrushy himself was undoubtedly charismatic, extremely plausible, persuasive and adept at getting what he wanted - in one sense the ultimate con man.

He recruited staff, often young from the organisations with which he did business in Birmingham Alabama. They would have had extensive knowledge of these supporting businesses and also personal contact and some standing in these organisations.

Scrushy seems to have created a company in which it was legitimate for senior staff to exploit their knowledge and the vulnerability of the organisations from which they were recruited.

It is clear that some of these previous employees were induced to participate in the fraud. Could they really have carried this off convincingly without their friends and previous colleagues smelling a rat?

Unless of course those colleagues knew and chose not to notice! As chief executive, they say, he Scrushy held sway over a circle of young, ambitious locals glad to accept an opportunity that was rare in Birmingham: The parties and glamorous lifestyle were even more of a draw.

2 what should healthsouth s auditors ernst young have done if they had perceived these flaws

It has been suggested that Scrushy fired the previous auditors because they refused to meet his requirements. Ernst and Young's role in HealthSouth's fraud must be seen in the light of the conduct of its accounting peers in ignoring fraud and sometimes actively participating in it.

This sort of thing is not recent or restricted to the USA. Shareholders were asked to approve the purchase of a majority stake by NME, a move supported by Anderson's independent report.

The report did not mention the disturbing senate inquiry and fraud investigation in Texas or the earlier fraud settlement in New Jersey. Both were to have a major impact on the company's prospects in Australia.

Concerns about Ernst and Young are not restricted to its dealings with HealthSouth. They would have known Ernst and Young's practices well and probably retained many friends there. They were well placed to design and implement a fraud that would not too obviously trigger the auditor's alarm bells.

They did a lot of very profitable business with HealthSouth and its interconnected companies, business they might have lost if they were "picky". They failed to detect the fraud even after they were tipped off in and again early in At that time, a number of HealthSouth executives besides Scrushy were on the MedPartners now Caremark board of directors.

"we're gonna lie to a lot of people…"

It listed a series of such violations that included booking as revenue the charges to clinic patients even when insurers denied payment. How can some hospitals have NO bad debt reserves? Are these clever tricks to pump up the numbers, or something that a novice accountant could catch?

You all can do much more, if all you do is look into it to see if what I say is true. Auditor had early warning on HealthSouth. Financial Times April 24, But the minutes of HealthSouth's board meetings from late throughpresented as evidence by the SEC last month, don't indicate that any such investigation took place.

Vines tried to spread the word about alleged questionable practices in the department -- but at every turn his disclosures came to nothing. Later, he tried to make his case online, where readers of the Yahoo forum dismissed his claims as typical Internet blather.

But his warnings were on target -- and today they offer a lesson in how hard it can be to sound the alarm against corporate wrongdoing By latehe had become uncomfortable with how the accounting department operated.

2 what should healthsouth s auditors ernst young have done if they had perceived these flaws

Over the course of that year, according to his testimony at the April federal court hearing, he came to believe that people in the department were falsifying assets on the balance sheet.

Vines acknowledges that he didn't mention the falsification of invoices. But he argues that the three accounts he pointed out raise plenty of serious questions by themselves -- and an accounting expert agrees.

Perino, a professor at St. That is a classic problem and the kind of thing that auditors should find, said Stanley D. In retrospect it is clear that there were pointers which should have alerted them to the fraud.

For example, he said, HealthSouth reported growth of percent in income before income taxes and minority interest from toalthough sales increased only 3 percent. The following year, he said, this type of income increased by 89 percent in the HealthSouth financial report, although sales rose only 8 percent.Problem 2HSQ: Questions What should HealthSouth’s auditors, Ernst & Young, have done if they had perceived these flaws?

step-by-step solutions Solved by professors & experts. Responsibility for the HealthSouth Fraud Ernst & Young should have been suspicious of HealthSouth’s billing policies and the management team that put those policies in place, but it was not. Ernst & Young’s Ethical Responsibility for the HealthSouth Fraud.

1. What were the major flaws in HealthSouth’s corporate governance? 2 & 5. What should HealthSouth’s auditors, Ernst & Young, have done if they had perceived these flaws?5/5(1). HealthSouth’s earnings, took two principal forms: (1) exaggeration of reported revenue, primarily through reductions to contractual adjustment accounts, and (2) failure to properly characterize and record operating expenses.

Answer to Questions What should HealthSouth’s auditors, Ernst & Young, have done if they had perceived these flaws?. 2 What Should Healthsouth S Auditors Ernst Young Have Done If They Had Perceived These Flaws. 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 .

HealthSouth : Overview