A fraud is a dishonest act by an employee that results in personal benefit to the employee at the cost to the employer. The most important elements of fraud are opportunity, Financial pressure and Rationalization. When opportunity is available to a person or a group, and they may be driven by financial pressure or driven by the power of money, he or she look for excuse to the dishonest act and commit the crime. (Kimmel, weygandt, kieso, 337) We are quite frequency overwhelm by the fraud reports. A lot of big cases of fraud have been committed throughout history, this essay is focus on one of the biggest case of fraud- the Healthsouth Inc. Which is a company started by Richard Scrushy in 1984. It is the first national chain of orthopedic hospitals and outpatient centers, and it …show more content…
For example, they intentionally overstate its asset. They wrote the record of the asset that from the year before to the current year (Lupica). Sarbanes Oxyley act also required the audit committee member to make right financial decision for the company. However, they over state their income year after year. Moreover, they violate the section 302 of the act which required financial report need to be reviewed by the officers and verify to make sure it is free of error and misleading information, and check and report the deficiency of internal control, but the company fail to do so(2). The fade financial statement of the Healthsouth Corporation is another violation of section 401 act which required accurate and correct financial statement (2). The company make up countless fake transitions to make the company looked growing quickly, and overstate its asset and earning, and understate its liabilities. Under Section 802 of the act, parties who intent in manipulate, destroy and some other ways to destroy records will be imposed fines and imprisonment (2). Healthsouth Corporation CFOs certainly have to suffer the
Fraud is usually comprehended as deceptive nature calculated for advantage. And usually this kind of people might be called a fraud. According to the U.S. legal system, fraud is a particular offense with specific features. Fraud must be proved by showing that the defendant’s actions involved five separate elements: 1. A false statement of a material fact; 2. Knowledge on the part of the defendant that the statement is untrue; 3. Intent on the part of the defendant to deceive the alleged victim; 4. Justifiable reliance by the alleged victim on the statement; 5. Injury to the alleged victim as a
Taking a look at Donald Cressey’s hypotheses which is now known as the fraud triangle depicts the certain criteria for the mind frame of the fraudster. The fraud triangle is a theory that consists of perceived pressures, perceived opportunity, and rationalization. It gives us the different pressures placed on individuals that would make them consider “cooking the books.” It also demonstrates where the possible opportunity lies so that we may take precautions to eliminate the opportunity. Last, it demonstrates how a fraudster rationalizes with themselves to make committing the fraud okay. Donald Cressey believes all three elements must be present for fraud to occur. Upper management is usually the focus of financial statement fraud because financial statements are done at the management level. So in this case financial statement fraud was committed by the CEO Gregory Podlucky
Hanson, J. R. (n.d.). Fraud or confusion? RDH Magazine, 19(4). Retrieved 3 15, 2014, from http://www.rdhmag.com/articles/print/volume-19/issue-4/feature/fraud-or-confusion.html
Consistent accounting and financial frauds in the U.S. alerted the SEC to the imperative need for policy and corporate governance changes. The Sarbanes-Oxley Act in 2002 was enacted to encourage financial disclosures, enhance corporate responsibility, and combat fraudulent behaviour. This Act also helped create the PCAOB, which oversees the auditing practice (Stanwick & Stanwick 2009).
Throughout the past several years major corporate scandals have rocked the economy and hurt investor confidence. The largest bankruptcies in history have resulted from greedy executives that “cook the books” to gain the numbers they want. These scandals typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of assets or underreporting of liabilities, sometimes with the cooperation of officials in other corporations (Medura 1-3). In response to the increasing number of scandals the US government amended the Sarbanes Oxley act of 2002 to mitigate these problems. Sarbanes Oxley has extensive regulations that hold the CEO and top executives responsible for the numbers they report but problems still occur. To ensure proper accounting standards have been used Sarbanes Oxley also requires that public companies be audited by accounting firms (Livingstone). The problem is that the accounting firms are also public companies that also have to look after their bottom line while still remaining objective with the corporations they audit. When an accounting firm is hired the company that hired them has the power in the relationship. When the company has the power they can bully the firm into doing what they tell them to do. The accounting firm then loses its objectivity and independence making their job ineffective and not accomplishing their goal of honest accounting (Gerard). Their have been 379 convictions of fraud to date, and 3 to 6 new cases opening per month. The problem has clearly not been solved (Ulinski).
Health care fraud is an ever growing problem with in our country. This is not a new issue, nor an issue that will ever go way. According to the Federal Bureau of Investigations (FBI) health care fraud cost tax payers two hundred and seventy two billion dollars in 2013 (Federal Bureau of Investigations, 2016). The numbers have continued to increase. When discussing health care fraud we need to know what exactly we are discussing.
Medicare fraud occurs when healthcare providers, suppliers, and private companies charge for services or supplies patients never receive. Additionally, abuse of the Medicare program also occurs because physicians and suppliers do not always follow best medical practices which leads to excessive costs through improper payments, or medically unnecessary services, both of which abuse the program. Conservative estimates suggest he...
Healthcare services have been on the rise for over 10 years now. According to a 2012 consumer alert, the industry provided $2.26 trillion in payments for more than four billion health insurance benefit claims in the year 2011(Fraud in Health Care). The bulk of the claims and the mainstream of fraud and abuse stem from the Medicare system professionals, who are knowledgeable about the process and persuade new clients into handing over their pertinent information in hopes of deception and illegitimate claims. Multiple and double billing, fraudulent prescriptions, are some of the major flaws in this organization that has made the healthcare services industry curdle. (AGHAEGBUNA, 2011) This is a non-violet crime and is often committed by very educated people including business people, hospital, doctors, and administrators.
Fraud has a great impact over the health care system, it has known for rising it costs continuously over ages. It has been estimated that 28 billion dollars are being spent every year approximately, which means 6300 dollars as an average
In the United States, Medicare fraud costs the taxpayers approximately 60-250 billion dollars annually (Pande & Maas, 2013). Unfortunately, past steps to deter future criminality of this type of fraud have been fruitless. Similarly, identifying healthcare institutions and professionals that commit fraudulent acts are problematic; due to the differences of services provided to patients. An example, general practice doctors may submit a significant number of billings each month as opposed to an occupational therapist (Musal, 2010). Healthcare institutions may overbill for hospital stays that did not require admission in the first place. Regrettably, identifying offenders and institutions only clarify a portion of the issue. In addition, the need to know which theories can provide an explanation for why the criminal deeds are perpetrated. Essentially, the integration of both neutralization and general strain theories can provide an overall explanation to Medicare fraud.
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
Richard Scrushy of HealthSouth Medicare could face years in prison, allegedly for changing the account figures and inflating the company’s to make him rich. Richard Scrushy was CEO of HealthSouth, the Fortune 500 healthcare company that he founded in his hometown of Birmingham. The SEC and the Justice Department allege that HealthSouth Company falsely inflated its profits by almost $3.1 billion -to push up the price of its stock. One of his chief financial officers blew the whistle by exposing the fraud on March, 2003. As a result the stock value dropped to just pennies a share, leaving thousands of investors holding the consequences. Scrushy admitted that the profits were inflated, but insisted that he knew nothing about it.
For those who do not know what fraud is, it’s basically deception by showing people what they want to see. In business it’s the same concept, but in a larger scale by means of manipulating figures that will be shown to shareholders and investors. Before Sarbanes Oxley Act there was “Enron Corporation”, a fortune 500 company that managed to falsify their statements claiming revenues over 101 billion in a span of 15 years. In order for us to understand how this corporation managed to deceive the public for so long, the documentary or movie “Smartest Guys in the Room” goes into depth by providing viewers with first-hand information from people that worked close with or for “Enron”.
The fraudulent financial reporting is the information in financial statement that will misleading, omission, and misrepresenting the users in order to attract potential investors and fulfil the shareholder’s expectation wealth. The company may has intended to use wrongly the accounting principle which related to classification, method of depreciation,
ABSTRACT: The quantity of accounting fraud cases keeps on rising. Fraud is a consistent thing that will reliably be around, and in a bigger number of routes than just a single. An extensive apportionment of organizations out there fighting fraud, either from within the organization, or from outside the organization. Knowing how to manage this is essential for an organization to be productive over an extended period of time. The investigation regarding the matter of accounting fraud will utilize sources from the web and the DeVry School Library.