...HealthSouth Corporation Case Study Managerial Communication Dr. Ben Busbee Dwight Frazier December 12, 2013 A. Executive Summary: The paper highlights the case analysis on one of the big financial fraud which occurred from 1986-2003. The case of HealthSouth is based on fraud, greed and corporate governance. The HealthSouth case shows that unethical management cannot succeed; sooner or later the truth comes out. The case highlights many key points and the major reason for the fraud was the result of failures of various standard mechanisms of control including the external auditors, the underwriters, and the board of directors, the financial market regulators and the analysts. HealthSouth was one of the country's largest providers of outpatient surgery, diagnostic imaging, and rehabilitation services, operating over 1,800 locations and reporting revenues of $4 billion. The company's management improperly accounted for some $2.7 billion of assets and earnings. Seventeen HealthSouth executives agreed to plead guilty to various charges in connection with this massive accounting fraud. B. Statement of the Problem: Thus, in the HealthSouth case, the research shows that it was close to the real life examples of the people who were “just employed”; however at the same time their transformation from the line of law-abiding citizens towards the law-breaking villains. Apparently the small compromises in morality and ethics led towards the greater compromises and as a result...
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...“The HealthSouth Scandal of 2003” SERRAON, ABIGAIL E. Accountancy 4Y2-1 ENGR. ANTHONIO CHAN March, 2016 INTRODUCTION Embezzlement, misappropriation, cheating or stealing is a form of fraudulent act done with an organization. There are television and newspaper stories nearly every day about all kinds of corporate schemes and scams. Behind every fraud is a person or a group of people who has taken what is not theirs to take. Some of those people intended to steal they just never thought they would get caught. Others were pulled into the original crime or some aspect of the cover-up and before they knew it they were labeled a co-conspirator. This study will examine the people behind the much publicized fraud scheme at HealthSouth. Some did not set out to commit white-collar crime but found themselves as defendants in criminal trials for fraud. In the HealthSouth case in observation, real life examples of people who were "just doing their job" but at some point crossed the line from law-abiding citizens to law-breaking villains. Seemingly small compromises in ethics and morality led to a full-scale commitment to fraud. Finally, we will conclude that nobody sets out in their career to end up in prison cleaning toilets and on the front page of the Wall Street Journal after they are arrested for fraud. At some point, though, many end up that way. A. Background of the Study The study all about the recent accounting scandal that were reported : “The HealthSouth Scandal...
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...assignment number (DoeJXXX0000-1) EXAMPLE: John Doe, PSY300, Assignment 1 = DoeJPSY300-1. BUSINESS ETHICS OKECHUKWU AKANNO Sr. NORTHCENTRAL UNIVERSITY ASSIGNMENT#8 MGT7019-8 Dr. JENNIFFER SCOTT September 16, 2012 Learner: OKECHUKWU AKANNO || MGT7019-8| Dr. JENNIFFER SCOTT| || BUSINESS ETHICS | #8| || Faculty Use Only TABLE OF CONTENTS PAGE Abstract --------------------------------------------------------------------------------------4 Introduction ------------------------------------------------------------------------------5 & 6 The role of Auditors at HealthSouth ---------------------------------------- 7 & 8 SEC Investigation ----------------------------------------------------------------------------9&10 Impact on Stakeholders ---------------------------------------11, 12, 13 & 14 Outcome and Fairness In Punishment ---------------------------------------- 15, 16 & 17 Conclusion -----------------------------------------------------------------------------------------18 References-------------------------------------------------------------------------------19, 20 & 21 ABSTRACT This paper will investigate the financial reporting scandals of the past decade at HealthSouth and the resulting U.S. legislative...
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...------------------------------------------------- ------------------------------------------------- Faculty Use Only ------------------------------------------------- Layla: ------------------------------------------------- ------------------------------------------------- Paper- Health South: The Scrushy way Layla O. Mora Northcentral University MGT7109-8 Janis McFaul, PhD November 15, 2012 Table of Contents: Introduction 1. Fraudulent activities perfumed by HealthSouth 2. Impact on stakeholders a. Impact on internal employees b. Impact on shareholders c. Impact on government and other involved parties 3. Factors affected HealthSouth culture 4....
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...each aspect of communication skills and report writing is vital to an accountant’s professional career. | Table of Contents I. Executive Summary 1 II. Introduction 1 III. Review of Literature 1 IV. Analysis 1 V. Recommendations 1 VI. Summary and Conclusions 1 VII. Appendix x 1 VIII. References 1 I. Executive Summary Accounting fraud is the deliberate manipulation of accounting records in order to make an organization's financial performance or condition seem better than it actually is. There are many examples of accounting fraud. * Merging short and long term debt into one amount for improving the perceived liquidity of the organization or a company. * Failing to disclose the risky investments or creative accounting practices. * Over-recording the sales revenue. * Under-recording expenses i.e. depreciation of expenses. From Enron, WorldCom and HealthSouth, it appears that accounting fraud is a major problem that is increasing in frequency and severity. research evidence has shown that a growing number of frauds have undermined the integrity of financial reports, contributed to substantial economic loses, and destroyed investors' confidence regarding the reliability of financial statements. The increasing rate of white-collar crimes demands stiff penalties and strong punishments. II. Introduction New laws and guidelines have helped reduce, but not eliminate fraud. Enron, WorldCom and HealthSouth scandals were detrimental to the public...
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...use this as a reference. Table of Contents 1. Assignment cover sheet p. 0 2. Title page: HealthSouth and the Scrushy Way p. 1 3. Table of Contents p. 2 4. Introduction p. 3 5. Government Subsidies p. 3 6. Signs of Corruption p. 4 7. Ethical issues of HealthSouth p. 5 8. Management of HealthSouth p. 5 9. Intimidation and Cooperation p. 6 10. Culture of Corruption p. 7 11. Lavish Lifestyle and Philanthropy p. 8 12. Impact on Stakeholders p. 9 13. Charges p. 10 14. Outcome and Fairness of Punishment p. 10 15. Conclusion p. 12 16. References p. 13 HealthSouth and the Scrushy Way Richard Scrushy overcame challenging teenage years, dropping out of high school and later obtaining his GED to become one of the most successful executives in the United States. Scrushy did so by subsequently getting his respiratory therapist certification and opening his own rehabilitation center, an all-in-one medical facility that led many to copy his idea. Scrushy founded HealthSouth in 1996 using $1 million in seed capital and turned it into a hugely successful medical services empire worth over $4 billion at its prime (Haddad, Weintraub, & Grow, 2003). HealthSouth had become the largest provider of outpatient surgery, rehabilitation, and diagnostic and imaging services as well...
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...Issues Involved with HealthSouth…………………………………. 5 1.) HealthSouth Founder and CEO Richard Marin Scrushy………...………………. 5 a.) Trailer Park to Charismatic Leader……………………………………. 5-7 b.) Leadership Tactics……………………………………………………….. 7 2.) Corporate Culture at HealthSouth………………………………………………... 8 c.) Following Directions for Failure……………………………………........ 9 d.) Faking corporate profits………………………………………………… 10 C.) The Impact on Stakeholders…………………………………………………………….. 10 3.) Employees and Executives……………………………………………………... 10 e.) Many Lost Jobs as a result……………………………………………… 10 f.) Top Level Management Complacency.………………………………… 11 4.) Investors and HealthSouth Stock……………………………………………….. 11 5.) HealthSouth Patients and Customers….………………………………………... 11 D.) Outcome and Fairness of Punishment…………………………………………………... 12 6.) 2003 SEC Civil Law Suit against HealthSouth………………………………… 12 g.) Charges of Fraud………………………………………………………... 12 h.) Inflated Earnings on Financial Statements ...…………………………... 13 7.) Punishment: Does it fit the crime? ...................................................................... 13 i.) CEO Richard Marin Scrushy’s sentence...……..………………………. 14 j.) Other HealthSouth executives sentence ………………………......... 14-15 E.) Conclusion ………………………………………………………………………….. 15-16 INTRODUCTION There have been many examples of CEO’s misdeeds in...
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...of Justice? |C.83 |C.83 |C.83 |C.83 |C.83 |B.63 |C.83 | |2. PTL Club—The Harbinger of Things to Come | | | | | | | | |3. GM |11.74 |11.74 |11.74 |11.74 |11.74 |11.74 | | | |12.65 |12.65 |12.65 | | | | | | | | | | | | | | |4. Unhealthy Accounting at HealthSouth |4.64 |4.64 |5.70 |5.70 |C.82 |G.84 | | | | | | | | | | | |5. KPMG: How Many Firms? |B.64 |B.64 |B.64 |1.56 | | | | | | | | | | | | | |6. Something Went Sour at Parmalat |6.58 |7.72...
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...unnoticed. First, there was only one person managing and assessing the internal control system. According to the Sarbanes-Oxley Act (SOX), non-accelerated filers require the CEO and CFO to separately perform an assessment on the internal controls over financial reporting (ICFR). However, in the case of Koss Corporation, both the CEO and CFO were the same person – Michael Koss. Therefore if he implemented a defective the internal control system, there was nobody there to correct him. Furthermore, the company’s auditor, Grant Thornton, was not required to, nor did they assess the effectiveness of the ICFR. They simply designed their audit of financial statements based on the manager’s report of the ICFR. Consequently, if Michael Koss incorrectly told Grant Thornton that the company had an effective ICFR, Grant Thornton probably designed a financial statement audit with little skepticism. Another problem with the structure of the Board of Directors was the lack of independence. Five out of the six members had been on the board for on average of 32 years, instead of changing members every few years. This violated one of the key elements of having an effective control environment as stated by COSO (Committee of Sponsoring Organizations of the Treadway Commission). As a result, Ms. Sachdeva knew the board well enough to...
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...some extent destabilized the economy. Audits, which were conducted to assess the validity and reliability of a company’s financial statements, were not detecting the material misstatements in the statements. As a result, both the US Government and the accounting profession needed to come up with a way to prevent these immense frauds from occurring in the future. As a response to these large frauds, in 2002, the US Government passed the Sarbanes – Oxley Act of 2002 (SOX) and the American Institute of Certified Public Accountants (AICPA) issued Statement on Auditing Standards No. 99(SAS No. 99) to improve investor confidence and the auditing function’s ability to detect material frauds. The intent of this thesis was to look at the fraudulent factors associated with several recent corporate frauds and compare them to the standards set by SAS No. 99. Through the analysis conducted, this thesis looks at the relationships between pressures, opportunities, and rationalizations made during the act of fraud. Table of Contents ABSTRACT ii INTRODUCTION 1 Sarbanes – Oxley Act of 2002 (SOX) 1 Statement of Auditing Standards Number 99 (SAS No. 99) 4 Parts of the Fraud Triangle 5 Types of Fraud 11 INSTANCES OF FRAUD 13 Enron Corporation 13 Adelphia Communications Corporation 17 AOL Time Warner, Inc. 20 Bristol-Myers Squibb Company 25 Global Crossing Limited 27 K-Mart 30 Tyco International, Ltd. 34 WorldCom 37 HealthSouth Corporation 41 CONCLUSION 45 Appendix:...
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...FROM GREAT TO GHASTLY: HOW TOXIC ORGANIZATIONAL CULTURES POISON COMPANIES THE RISE AND FALL OF ENRON, WORLDCOM, HEALTHSOUTH, AND TYCO INTERNATIONAL David R. Lease, Norwich University Abstract This paper presents an analytical and comparative study of four recent corporate scandals involving organizations that had previously been recognized as both ethically and organizationally sound. Based on these case studies, the following issues are discussed: (1) The role of leader behavior and organizational/leadership styles in shaping the corporate organizational culture of an organization, and (2) The extent to which this culture renders the organization and its members (including the top executives) prone to ethical misbehavior. The four companies selected for this case analysis are: Enron Corporation, WorldCom, Inc., Tyco International, Ltd., and HealthSouth Corporation. Each case is considered individually. The basic elements in the scandal are outlined and the principal aspects of each organization’s corporate culture discussed, with special emphasis on the influence of leadership styles and leadership behavior/practices on organizational culture. The four cases are then compared and contrasted in the light of the existing evidence on the relation between corporate culture and ethical misbehavior. PRELUDE “We were doing something special. Magical. It wasn’t a job – it was a mission. We were changing the world. We were doing God’s work.” – Jeffrey Skilling, former Enron COO, President...
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...out corruption, misappropriation of assets, and fraudulent financial reporting, it appears that fraud in its various forms is a problem that is increasing in frequency and severity. KPMG’s Fraud Survey 2003 documented a marked increase in overall fraud levels since its 1998 survey, with employee fraud by far the most common type of fraud. The 2003 survey also noted that fraudulent financial reporting had more than doubled from 1998. This trend is consistent with the unprecedented recent spate of large accounting frauds (Enron, WorldCom), as well as the increased number of accounting restatements and SEC enforcement actions in recent years. (See 2003 Annual Review of Financial Reporting Matters by the Huron Consulting Group and the SEC’s Report Pursuant to Section 704 of the Sarbanes-Oxley Act of 2002.) In response to the fraud problem, Congress and regulatory authorities have enacted tougher laws and increased enforcement actions. Organizations are implementing tighter controls and broader oversight. The auditing profession has adopted more rigorous auditing standards and procedures, and software developers are adding continuous monitoring features to back-office systems. It remains unclear whether these efforts are sufficient to mitigate the fraud problem. Many studies suggest fraud is more likely to occur when someone has an incentive (pressure) to commit fraud, weak controls or oversight provide an opportunity for the person to commit fraud, and the person can rationalize...
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...Chapter Four Professional Accounting in the Public Interest, Post-Enron Purpose of the Chapter When the Enron, Arthur Andersen, and WorldCom debacles triggered the Sarbanes-Oxley Act of 2002 (SOX), a new era of stakeholder expectations was crystallized for the business world and particularly for the professional accountants that serve in it. The drift away from the professional accountant’s role as a fiduciary to that of a businessperson was called into question and reversed. The principles that the new expectations spawned and renewed resulted in changes in how the professional accountants are to behave, what services are to be offered, and what performance standards are to be met. These standards have been embedded in a new governance structure and in guidance mechanisms, which have domestic and international components. The influence of the International Accounting Standards Board (IASB) and the International Federation of Accountants (IFAC) will be as important as that of SOX in the long run. This chapter examines each of these developments and provides insights into important areas of current and future practice. Building upon the understanding of the new stakeholder accountability framework facing clients and employers developed in earlier chapters, this chapter explores public expectations for the role of the professional accountant and the principles that should be observed in discharging that role. This leads to consideration of the implications for services to be...
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...Draft - Corporate Governance Considerations This material was prepared by Eliot H. Sherman – July 2005 FOCUS Learning Objectives By the end of this chapter, you should be able to: Understand the issues related to agency and delegated responsibility. Describe the similarities and the differences in the corporate scandals that have been identified in the past few years Identify the responsibilities of managers to the shareholders and other stakeholders associated with their corporations. OVERVIEW Corporate governance is not a new topic. It has been around for many years, often described as the “agency issue.” However, in recent years it has taken on increased significance, demanding increased attention. Since 2001, in particular, the corporate marketplace has seen a significant number of headline grabbing scandals involving major corporations. These scandals have raised new questions about corporate governance and, as a direct consequence of some of these situations, the U.S. Congress passed a very broad piece of legislation called the Sarbanes-Oxley Act of 2002. This law has had a wide range of consequences directly affecting large public corporations and public accounting firms and, less specifically, smaller public firms, private corporations, not-forprofit organizations and regulatory entities in many different ways. This law mandates some specific actions for large public corporations, many of these actions being required shortly after the legislation passed and others in...
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...were able to show the company as profitable was transferring debits and losses to offshore businesses that made it look as though on the books they were profiting and to make those unprofitable parts of the company disappear into an offshore business. To hide their losses in the trading business Skilling used mark-to-market accounting. Mark-to-market accounting is used in the security business but what Skilling did was use it for everyday business. Doing this let them write out what they thought a certain venture would be making in the future, without having to have actually made a dime. This let Enron show on the books that the company was actually turning a profit, which made the company look as though it was good to invest in. For example an article written by Chris Seabury stated that what Enron did was build a power plant and then immediately claim the project profit on its books. If the profit of the plant was less than the projected profit the company would transfer the assets to an off the books...
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