Discussion Questions
- In Chapter 5 we discussed that management is responsible for identifying, assessing and controlling risks and that a framework should be used to mitigate, eliminate, or compensate for these risks (ERM). Which element(s) of the ERM did you find most relevant in the HealthSouth case? Explain your choice(s) by using examples from the case.
- We’ve learned that auditors have certain responsibilities as it relates to fundamental principles of auditing. List and briefly explain those responsibilities. Which responsibilities did EY fail in regards to HealthSouth audit? Be sure to use examples from the case to support your response.
- Auditors also have certain responsibilities as it relates to assessing inherent risks (Ch. 4) and control risks (Ch. 5) of an entity. Identify and explain at least two failures EY had in assessing these risks during the HealthSouth audit? Use examples from the case to support your response.
- The case states that “the family” held meetings to determine ways increase earnings in order to meet analyst forecasts. From the methods stated in the text, choose two and explain how the family would have used that method to increase earnings. Also briefly discuss each method’s impact to the financial statements.
- HealthSouth concealed the fraud by keeping the fraudulent transactions below $5,000. What recommendation(s) would you give to EY to improve their sampling practices? Also explain why would they improve sampling.