Audit2

Audit2 - Ryan Petteruti Audit/ Falk February 16, 2011...

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Ryan Petteruti Audit/ Falk February 16, 2011 Unhealthy Accounting at HealthSouth 1. Ernst & Young was aware of several red flags during the audit, including the 500% rise of net income from 1999-2001, the fact that internal auditors were denied access to the corporate books and the numerous complaints about accounting practices coming from employees. EY also seemed to focus on two important risk factors relating to management’s keen interest in seeing a rising stock price and the fact that management ranks were dominated by those at the top. But although they were made aware of these risks and had plenty of evidence to further investigate, EY didn’t completely take all of the necessary steps to carry it out. Most importantly, they DID NOT WEIGH OUT THE CUMULATIVE EFFECTS, together, of the red flags. A. For example, they did not validate the authenticity of the false accounting entry documents or physically investigate the inventory at each audited site. B. They also did not contact Michael Vines to further discuss his insider knowledge.
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This note was uploaded on 03/16/2011 for the course ACG 4632 taught by Professor Falk during the Spring '09 term at FSU.

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Audit2 - Ryan Petteruti Audit/ Falk February 16, 2011...

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