Healthsouth Accounting Fraud Case Study

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Company Background
HealthSouth Corporation, based in Birmingham, Alabama, is the United States’ largest owner and operator of inpatient rehabilitation hospitals. It is founded by Richard M. Scrushy and incorporated in Delaware on February 22, 1984 as Amcare, Inc. (Saux, 2014)
HealthSouth Corporation hired more than 60,000 employees at 2,000 facilities which operating in 33 states across the U.S. along with its facilities in Puerto Rico, Canada, UK and Saudi Arabia. (Saux, 2014) It provides a higher level of patient care and therapy to patients who are recovering from different conditions through its network of inpatient rehabilitation hospitals, outpatient rehabilitation satellite clinics and home health and hospice agencies. (PR, 2015)
The company outstanding its competitors with high qualified and experienced rehabilitation teams and advanced technology to providing the best rehabilitation care for each patient. It connects
…show more content…
Scrushy, the Chief Executive Officer of HealthSouth, sold $100 million in stock few days before the corporation published a huge loss. HealthSouth was sued by the U.S. Securities and Exchange Commission (SEC) because accounting fraud of the corporation allegedly overstating profits by $1.4 billion. (Aguilera, 2015)
In 1996, Scrushy had directed the firm’s accountants and executives which misstated company revenue for the purpose of satisfied shareholders’ expectations and control the market stock price of HealthSouth. The fraudulent practice continued for seven years at HealthSouth. In certain fiscal years, the corporation’s revenue was exaggerated approximately 4700%. (Saux, 2014) This is a large violation of conservatism. The $1.4 billion represents greater than 10% of HealthSouth’s entire assets. According to its fraud revenue, HealthSouth’s corporate taxes were greater than its real profit. (Aguilera,

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