This website uses cookies to ensure you have the best experience. Learn more

Health South Fraudulent Accounting Essay

1087 words - 5 pages

We learned in class by watching the 6 video clips regarding the big Scandal with HealthSouth that one the two major activities in their fraud was falsely capitalizing regular expenses
In a nutshell
HealthSouth is A Public company who is providing outpatient rehabilitation services, They noticed that the business is not that great as they proclaimed, business is not so profitable and it also have too much expenses which this will end up taking away from the profit and they will show lower earnings that expected so they came up with a fraudulent idea to create false entries in their books by claiming that the expenses they have is not real expenses, they called it investing like everyone understands when a business is buying a building its not called a expenses which will show the business less profitable ,it is the opposite the business is growing, the same think they did with entering regular expenses like payroll or utility expenses

But in order the books should look a little acceptable and no one should come up on their fraud instantly and specially the lower level bookkeeping team by doing their day to day entries and knowing that utility expenses is not a capital improvement they had to do it in a professional way
Let’s go in to details of entering an expenses and closing it off by year end so we can understand how they did it to avoid being suspicious for their bookkeepers and it should be polished nicely

As we learned in class by keeping accounting on the simple way of a General ledger the entries goes as follows, every entry is A Debit for 1 account following with a credit on the other for Example when you have a Rent Expenses of $ 15,000 meaning you taking out money from cash account to pay your rent the entry is A Debit of $ 15,000 for the Rent Expenses account and a credit of $ 15,000 for the Cash Account
What will happen after such a entry is that the trial balance will be correct the Debit and The Credit Accounts will match evenly and if you will drill in deeper into the account equation (Assets = Liabilities + Owner's Capital ) it will also match up
When it comes to the end of the year when closing all temporary accounts which is the expenses & the income accounts into the income summery account (and let’s say that your income account was $ 50,000) and then you closing the income summery account into the capital account which in our case you will increasing Capital with $ 35,000 ($50,000 Income minus $ 15,000 Expenses) and again the trial balance and the account equation are correct

This is a different kind of expenses for Example you bought a building for your business and you need to upgrade the building with $ 15,000 , But Remember that this expenses is actually different this is increasing your Assets by increasing the value of your building but during the year you want to keep a detailed accounting on your building improvement like Plumbing, Electric,...

Find Another Essay On HealthSouth Fraudulent Accounting

Effectiveness of Regulatory Reforms as Deterrent to Frauds and Unethical Actions

1924 words - 8 pages -Oxley Act in 2002 after major scandals revealed loopholes in accounting policies. As Arthur Anderson LLP has double duties in Enron scandal, auditors are limited to types of auditing to maintain independence under SOX Sec.201. Sec. 10A of Securities Exchange Act of 1934 is amended by requiring audit partners to rotate after five years of service. Lynn Turner, former chief accountant at SEC, reports significant decrease in number of fraudulent

When the Bubble Burst Essay

1539 words - 6 pages By the time I arrived state side from my second tour in the Middle East the housing bubble had already burst. I noticed a drastic change in the way that many of my friends and family were living. Several of my friends that worked in real estate had sold their boats and seconds houses. My own stock portfolio had lost a third of its value. My sister and her husband had defaulted on their home mortgage leaving them scrambling for a place to live. I

phase diagram

4456 words - 18 pages Introduction: Chemical equilibrium is a crucial topic in Chemistry. To represent and model equilibrium, the thermodynamic concept of Free energy is usually used. For a multi-component system the Gibbs free energy is a function of Pressure, Temperature and quantity (mass, moles) of each component. If one of these parameters is changed, a state change to a more energetically favorable state will occur. This state has the lowest free energy

Revolutionary Work of Art

1890 words - 8 pages Walter Benjamin emphasizes in his essay, “The Work of Art in the Age of its Technological Reproducibility” that technology used to make an artwork has changed the way it was received, and its “aura”. Aura represents the originality and authenticity of a work of art that has not been reproduced. The Sistine Chapel in the Vatican is an example of a work that has been and truly a beacon of art. It has brought a benefit and enlightenment to the art

Enlightenment Thought in New Zealand Schools

1594 words - 6 pages In this essay I will be looking at how the political and intellectual ideas of the enlightenment have shaped New Zealand Education. I will also be discussing the perennial tension of local control versus central control of education, and how this has been affected by the political and intellectual ideas of the enlightenment. The enlightenment was an intellectual movement, which beginnings of were marked by the Glorious Revolution in Britain

Psychological Egoism Theory

2240 words - 9 pages The theory of psychological egoism is indeed plausible. The meaning of plausible in the context of this paper refers to the validity or the conceivability of the theory in question, to explain the nature and motivation of human behavior (Hinman, 2007). Human actions are motivated by the satisfaction obtained after completing a task that they are involved in. For example, Mother Teresa was satisfied by her benevolent actions and

How Celtic Folkore has Influenced My Family

1587 words - 6 pages Every family has a unique background that influences the way they live and interact with other people. My parents, who emigrated from Ireland to the States with my three brothers in 1989, brought over their own Celtic folklore and traditions that have helped shaped the way our family operates and lives. One aspect of folklore that has helped shape my family dynamic is the Celtic cross—both its background and what role it has played in our lives

Julia Margaret Cameron

1406 words - 6 pages At a time when women were looked upon as being homemakers, wives, mothers and such the late 1850's presented a change in pace for one woman in specific. Photography was discovered in 1826 and soon after the phenomenon of photography was being experimented with and in turn brought new and different ways of photo taking not only as documenting real time, but also conceptualizing a scene in which an image would be taken. Julia Margaret Cameron will

Evaluation of School Improvement

1403 words - 6 pages The evaluation process should be progressive to incorporate overall planning, implement changes, which contribute to success. In order to focus on school climate and norms, the evaluation design must include the students, instructions, and outcomes to improve communication and building-level concerns to be address in this response. School Climate and Social Norms The school principal, other staff leaders, and personnel set the tone and the

Case Study: The Benefits of Animal Testing

1757 words - 7 pages Nine year old Amy has already had a rough start in life. She was born with an abnormal heart that hinders her everyday activities. Amy is unable to keep up with kids her own age because she often tires out easily. As a consequence, she has very little friends and is often alone. Amy is forced to take different medications everyday just to survive. Amy’s life consists of medicine, doctors, and constant hospital visits. However, Amy is due for a

Myth and Magic: Realism in "One Hundred Years of Solitude"

1531 words - 6 pages “He enjoyed his grandmother's unique way of telling stories. No matter how fantastic or improbable her statements, she always delivered them as if they were the irrefutable truth” (Wikipedia, 2011). Experiences are particular instances of one personally encountering or undergoing something and in these moments of time life changes for the best or the worst and memories are formed. These recollections such as riding your first bicycle, going to

Similar Essays

Richard Scrushy And Health South Essay

2293 words - 9 pages audit procedures any other substantive questionable activities outside of the capitalization issue” (Weld et al, 2004, p. 45). It has become apparent, that for many years, the financial statements and disclosures of HealthSouth Corporation did not represent its true economic picture nor did it conform to generally accepted accounting principles (GAAP). “At the end of the day, however, Ernst & Young must have been quite pleased with the

How The Sarbanes Oxley Act Will Impact The Audit Function

2007 words - 8 pages (Frieswick, 2003). While many view the Arthur Anderson scandal as the classic case of the deterioration of the audit function, there are other cases which demonstrate the predictability and inadequacy of the audit processes employed by many of the top accounting firms. One such case involves healthcare provider HealthSouth Corporation. HealthSouth and its former CEO Richard Scrushy orchestrated a scheme to overstate their earnings in order

Corporate Compliance Benchmarking Mba 560 Essay

4997 words - 20 pages failed and Ebbers was removed from the CEO position.WorldCom's CFO and other members of the leadership team continued to use fraudulent accounting methods by underreporting line costs and inflating revenues to raise the stock price. The fraud was ultimately uncovered and it was estimated that the company's total assets had been inflated by $11 billion. Later, WorldCom filed for Chapter 11 bankruptcy protection and changed its name to MCI. In the

02. Aaron Beam And The Health South Fraud

894 words - 4 pages ? In Scrushy's? The obstacles I see in Aaron Beam's behavior are "Rationalizing Our Actions and Displacement of Responsibility". Rationalizing his actions is supported by comments he made in reference to the actions he had or was about to take in supporting his employer. Aaron Beam stated in Velasquez (2012), "He described the move to himself as aggressive accounting but definitely not fraudulent" (p 68). In the continual cooking of the books