The HealthSouth fraud was ousted by the former Chief Financial Officer (CFO) Weston Smith in 2003 when he became a whistle-blower, HealthSouth who at this time were facing all-time low revenue earnings due to changes in reimbursement of Medicare patients by the government the year prior were deeper under water at that point.

In the same year of 2003 in which Weston Smith tipped off the US. Securities and Exchange Commission (SEC) of the occurrence of fraud at HealthSouth, they launched an official investigation and a fraud examination was conducted, in which methods such as collecting testimonies and using witnesses to gather evidence of the fraud that took place.

The fraud examination was executed by the SEC which began after Weston Smith informed the SEC the occurrence of fraud at HealthSouth. After the official investigation began more executive members came forward shortly, and began cooperating with the investigation of the case. With a major downturn in the earnings due to changes in reimbursement procedures, the SEC also investigated whether or not the losses that were posted were related to the sale of stocks on the market, as this would be a case of textbook insider trading as these executives knew confidential information or non-public about the happenings of the company and used that information for their personal financial gain.

HealthSouth then hired an independent law firm, to review whether these sales of stocks were related to the postage of a loss, as the timeframe was suspicious. The independent law firm later found these two suspicions were completely unrelated from each other, however the SEC begged to differ and later sent FBI agents to conduct a search on the HealthSouths headquarters. Although this search was conducted no major paper trail that had any evidence could be found.

The HealthSouth Executives who initially pleaded guilty after the commencement of the case implicated most of their collaborators as well whether on purpose or not such as other managers who were involved or the auditing firm Ernest Young whose former employees suspiciously made up most of the executive board. The firm was later fined and blamed for their negligence and gross oversight in this case.

Determine the existence of possible financial statement Fraud by executive members of HealthSouth. Financial statement fraud occurs when corporations misrepresent or deceive investors into believing that they are more profitable than they actually are (Bloomenthal, 2021). The examination is predicated upon testimony received from (CFO) Weston Smith into the possible misrepresentation being committed by other employees as well as other executives of the financial position of the company.

After the initial investigation we found that HealthSouth company officials compared financial statement expectations of analysis and investors, and then used these expectations as guidelines when manipulating records to achieve the desired results and finally created false documents to cover their tracks. Over the course of the above stated period, HealthSouth's earnings were exaggerated by anywhere from $3.8 billion to $4.6 billion. Consequently, the firm's market value was raised, and further capital investment was attracted. It was revealed that top company officials reviewed quarterly unpublished financial results and adjusted figures to reflect market expectations.

Management was well aware that every transaction above $5,000 would be scrutinised by the auditors. As a result, staff would only shift little sums of money at a time, ranging from $500 to $4,999 to evade auditor notice. Considering that HealthSouth's revenues was exaggerated by about $5 billion, in order to pull off this fraud, it would have taken around two million journal entries and all the paperwork to support the faked entries if the average journal entry was $2,500.

According to Hamilton (n.d.), this volume of labour was a strong indicator that the fraud was widespread inside the organisation, both in terms of involvement and awareness.

1) summarize the article

2) make recommendations based on the fraud committed