HEALTHSOUTH, INC.
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 the true "tone at the top" of a company?
4. What is the appropriate response by auditors to information from “disgruntled” employees?
5. HealthSouth has sued Ernst&Young and Ernst&Young is also the target of a federal securities class action suit. What are Ernst&Young’s likely defenses against HealthSouth? Against the class action suit?
6. HealthSouth concealed the fraud by keeping the fraudulent transactions below $5,000. What recommendation would you have to Ernst&Young to improve its sampling practices?
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