UNHEALTHY ACCOUNTING AT HEALTHSOUTH COMPANY PROBLEM

DISCUSSION PROBLEM

1. What are several red flags that E&Y either was or should have been aware of in the audit of HealthSouth?

2. What procedures can auditors perform to detect fraudulent entries made during the consolidation process?

3. How can auditors determine a company's true "tone at the top"?

4.What is the appropriate response by auditors to information from "disgruntled" employees?

5.HealthSouth concealed the fraud by keeping the fraudulent transactions below $5,000. What recommendation would you have given to E&Y improve its sampling practices?