Summary HealthSouth Corporation, established in 1984, is a health care company and also the largest owner and operator of inpatient rehabilitative hospitals in the United States. This company links orthopedic hospitals and outpatient centers and provides high quality service to patients. However, in 2003, an accounting scandal appeared in HealthSouth; Richard M. Scrushy, the chief executive officer (CEO) of HealthSouth, was accused for improperly reporting corporate earnings in order to satisfy the shareholder?s expectations. The investigation revealed that?Scrushy and other executives in HealthSouth falsely prepared the financial statements and made up numbers, so earnings was inflated $1.4 billion from 1996 to 2003. Scrushy was caught after he sold $75 million in stock a day before a huge loss posted in company. As a result, Scrushy was acquitted of this accounting fraud but was convicted for bribing the governor of Alabama.
The paper will address the story of HealthSouth Corporation, analyze some financial ratios based on the financial statement, and provide audit procedures that could discover the company?s fraud.
HealthSouth was founded in Birmingham, Alabama in 1984 and turned into the nation?s largest chain of outpatient surgery, diagnostic imaging, and rehabilitation hospitals. The company is one of the leading providers of rehabilitation, surgery, and diagnostic services. HealthSouth currently employs more than 60,000 people and has more than 2,000 facilities…