The company went public in 1986 and in order for the company to meet Wall Street’s expectation, the company began to artificially inflate its earning in order to maintain the market price for their stock, this was a credulity problem because the management knew that if they did not fix the earning when they fall short of wall street, their stock will fall and they had to organized meetings to discussed ways which the accounting staff would falsify the HealthSouth’s books to fill in the gap and meet desired earning.
Knowing no one will suspect what that the management is cooking the book, it was easier for them to continue to fix the earning every time they came short of expectation “because HealthSouth only reported net revenues in its public filings, the impact of these adjustments were easier to conceal. In addition, contractual adjustments are subject to a significant degree of management discretion, and the Company offered the public little clarity about how it determined these adjustments. 1 Another problem of credulity that result in the fraud was inside trading information advantage that the Richard Scrushy and other senior executives used to sell their stock in HealthSouth stock for “$14. 05 and then buying it back at $10. 76 weeks before the company made an announcement in regards to new payment policy of Medicare that resulted in the stock price to drop for more than 50 percent”. 2 Lack of integrity on part of Richard Scrushy, the company accountants, and other senior executives were factors in the accounting fraud that took place in the company for years.
The Essay on An Assessment on the Importance of Public Personnel Management as a Field of Study
Public Personnel Management as a field of study has undergone considerable development in the past 40 years. Personnel professionals now have available a wide range of techniques which they can apply toward the efficient acquisition, allocation, and development of human resources – human resource planning, job analysis, selection, appraisal, training, and labour management relations. The field of ...
Richard Scrushy was the CEO of the company encouraged the cooking of the books for his own personal profit because if the real state of the book were known, he would have lost substantially amount of money as result of his shares in the company, bonus and annual incentive awards. Even at a moment in time some of the senior executives had advised him to abandon the earnings manipulation scheme but refused because of his stock and he was ready to do so until he sold his stock.
On the senior executives’ part, it was easy for them to hide false assets because the company owned hundreds of thousand of fixed assets spread across it almost 2,000 facilities around the time. In order for them not to lose track of the fictitious assets, “the accountants market them as “AP Summary” on the sub-ledger and were recorded for varying amount to avoid red flags and also kept them below the threshold”3 that the company auditor Ernst and Young used in selecting which assets to test.
The accountants created and provided the auditors with fictitious supporting documentation when one of the nonexistent assets was selected for testing. Lack of independence and negligent of the auditor also played a major problem in the fraud, the company had a recruitment scheme of recruiting past employees of it auditing firm, who knew the practices the auditing firm practices well and had friends there, which was aimed to design and implement fraud that would not too obviously trigger the auditor’s alarm.
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.
The Essay on Recommendation Brief for an Internal Auditor
The client has a problem with an out of control system. So, the client is asking for a recommendation to hire an internal auditor. In this recommendation brief the background benefits will be discuss. In the same brief the justifying the benefits of using the internal auditor will be discuss. In conclusion a recommendation on a person whose has the background for the auditor. Benefits of Internal ...
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 place in the company, the CEO was not found guilty of all charges brought against him based on argument that fraud was done without his knowledge but he was charged in a federal court of bribery and mail fraud, which he was found guilty and sentenced to 7 years in prison. He began his serving in 2007 and his appeal request was denied in May 2009. He was also charged in civil court in a shareholder lawsuit and he settled with SEC for $81 million. The CFOs Malcolm McVay was sentenced to 6 months home detention and 5 years probation after the tenure, also fined $10,000 and ordered to forfeit $50,000 while Michael Martin was given 5 years probation for his role and fined $50,000 and order to forfeit gain of $2,375,000”. 3 Aaron Beam, the first CFO of the company was “sentenced to three months in jail and also fined $10,000 and order to forfeit $275,000”. 3 The finance chief who blew the whistle on the accounting scandal was given “27 months and also ordered to forfeits $1. million in ill-gotten gains and given one year probation after his release”. 3 William Owens, the former CFO was “sentenced to five years for his role and ordered to forfeit $12 million in assets”, which he contested and no ruling was found based on his contestation. Ernst and Young the auditing firm of the company at the time of the fraud was not charged with any criminal charges but was named in civil lawsuits filed by the shareholders.
The Essay on Company Fraud
Ongpin mounts proxy campaign to regain control of Belle Corp. by :Rocel C. Felix 5/21/00 Ousted Belle Corp. chief executive officer and former Trade Minister Roberto Ongpin is gearing up for a full scale war to reclaim his seat and recover control of the property and gaming firm from the camp of Willy Ocier and his father, Benito Tan Guat, who last year staged a successful mutiny against Ongpin's ...
Based on findings done by forensic accountant hired by the Board of Directors of the company, preventive and detective control that can be put in place to avoid such reoccurrence are improvements to the Company’s contractual allowance accounting, the implementation of various policies and procedures related to journal entries, stronger control over fixed assets, and a robust internal audit department that will report directly to the audit committee instead of the CEO.
Personal morality and ethics make up the collective morality and ethic of a corporation. HealthSouth was described as a monolithic entity that has life of its own but in reality, the culture of the company is simply the sum total of its leadership and employee. The company should revaluate it corporate social responsibility. There should be limits to the power of a chief executive officer and the power of a CEO can be controlled by the Board of Directors.
The company’s Board of Directors should provide oversight of the company’s CEO performance; protect the long-term interest of the shareholder by making management to be responsible, and providing oversight of the company’s financial performance through its audit committee. Even though at the end of it, the company emerged from the experience and so far as a successful recovery. References 1. Weld, L. G. , Bergevin,P. M. , and Magrath, L. ,(2004, October), “ Anatomy of a financial fraud: A forensic Examination of HealthSouth”.
