HealthSouth: Case Study on Corporate Fraud

Theoretical Model of Fraud

When taking a gander at theoretical models of fraud, there are the fraud triangle and the fraud diamond. The three noteworthy components of both incorporate pressure, opportunity, and rationalization. Be that as it may, the fraud diamond incorporates a fourth component, capability. As indicated by Wolfe and Hermanson, "Opportunity opens the entryway to fraud, and impetus and rationalization can draw the individual toward it. In any case, the individual must have the capability to perceive the open entryway as an opportunity and exploit it by strolling through, once, however on numerous occasions" (Wolfe, D. and Hermanson, D. 2004). As found on account of HealthSouth, the top officials and workers had what it takes and capacities to propagate the fraud. The HealthSouth fraud was an instance of internal fraud, otherwise called occupational fraud. Occupational fraud is the place somebody can utilize their occupation for individual advancement through intentional abuse or misapplication of the association's benefits (ACFE). As we had seen in HealthSouth, each real job player of the fraud was in the correct position of the organization to aid activities. The instigator, and proprietor, Richard Scrushy is a prime model for utilizing the fraud diamond hypothesis. He had the motivator, opportunity, rationalization, and capability to submit the fraud in his organization. The incentive and pressure that inspired the activities of the fraud for the most part originated from the money related markets. During the 1990's there was a higher interest by speculators for high development rates. This interest was spurred by the flood of development announced by innovation organizations. This made more organizations be inventive to accomplish development, anyway it likewise caused inspiration for others in submitting fraud, for example, the case with HealthSouth. With this intense interest, Richard Scrushy had the incentive to make the organization look better and secure progressively investment opportunities for himself. The opportunity that emerged to submitting the fraud was set by the tone of the top officials and their frame of mind towards the fraudulent activities. The conduct and mentality are a significant viewpoint in forestalling fraud. In the event that administration overlooks it, at that point a chain impact, lower key workers will endure and support the activities of the representatives. For HealthSouth, Richard Scrushy drove the infractions and got the most noteworthy punishments. Huge numbers of the representatives of HealthSouth supported their activities by defending the fraud would just be impermanent and amended a short time later. Ken Livesay, for instance, expressed his supervisor guaranteed him the fraud would be brief, a one-time event. Be that as it may, after time, he went from reluctant to willing because of the inspiration eagerness. Because of the capability of the significant culprits in their jobs of the organization, the fraud had the option to proceed for an extensive stretch of time. They had the option to supersede internal controls, spread their tracks, and pressure a greater amount of the lower representatives into finishing the undertakings. On the off chance that a lower leveled worker had attempted to submit the fraud, it is conceivable it would have been recognized since they needed control over the internal control frameworks.

Ethical Framework

The Association of Certified Fraud Examiners is comprised of experts of CFEs, Certified Fraud Examiners, and Associate Members, who have met up to work towards distinguishing and forestalling fraud. The measures of the ACFE requires specialists and analysts to cling to its code of morals that incorporates customer confidentiality, objectivity, and integrity among others. The code additionally expresses that the specialists keep up a degree of polished skill consistently, and ought not participate in any illicit or unethical exercises. As an individual from ACFE, one must cling to customer confidentiality. "CFEs will not reveal classified or special data got over the span of an expert commitment without the express consent of the customer/business or another proper specialist" (ACFE, Professional Standards for Certified Fraud Examiners). During an examination, it is significant that the analyst keeps up integrity and dependability to defend any touchy data from unapproved sees. It is likewise significant that they don't utilize the data assembled for their own employments. Examiners needs to likewise follow and maintain integrity during an examination. The CFE ought to keep up integrity consistently and not forfeit it to serve the customer or open intrigue. Integrity depends on having moral and ethical standards. On the off chance that these are discovered lacking, at that point the trust of the customer and open is lost. The adherence of objectivity is firmly identified with integrity. Objectivity alludes to the capacity to lead an examination without being affected by their very own sentiments or the emotions and thought processes of others (ACFE). In remaining goal, the inspector settles on a choice dependent on actualities. An absence of objectivity would influence the nature of the examination. Deception can be utilized during the meeting procedure of a fraud examination; be that as it may, it is a tricky incline of being unethical. During a meeting, the agent could distort the reality of the workplace to make the interviewee progressively pending about the fraud. Whenever utilized accurately, it very well may be a suitable method to get data as long as it is done decently. In the Supreme Court Case Fraizer V. Cupp, the officer falsly told the petitioner that Rawls had confessed in order to get the petitioner to talk. While that is deception, I do not think that is wrong of the officer to do, trying to get the petitioner to talk and tell his story of what happened. I believe not all deception is wrong. However, when the officer told him that he could not be in anymore trouble in order to get the petitioner to fully confession and sign a written confession, then later submit it into evidence, I think is wrong. In the feeling of my own ethical structure, I would underline on integrity, truthfulness, objectivity, and customer confidentiality. These particular components will guarantee a high caliber in examinations and ensure the customers' data. I accept these are critical systems to be a compelling CFE or some other specialist.

Resources:

• Abdullahi, R. a. (2015). Fraud Triangle Theory and Fraud Diamond Theory. Understanding the Convergent and Divergent for Future Research. International Journal of Academic Researching in Accounting, Finance and Management Sciences, 5(4), 38-45.
• ACFE. (2012, January). Retrieved from Professional Standards for Certified Fraud Examiners: https://www.tn.gov/assets/entities/tdot/attachments/Professional_Standards_for_Certified_Fraud_Examiners.pdf
• ACFE. (n.d.). ACFE. Retrieved from What is Fraud?: http://www.acfe.com/fraud-101.aspx
• Hamilton, C. (n.d.). HealthSouth: A Case Study in Corporate Fraud. Retrieved from ARXIS Financial, Inc.: http://www.arxisfinancial.com/images/pdfs/Fraud-Health_South_Case.pdf
• United States Supreme Court. (1969, April 22). FRAZIER v. CUPP. Retrieved from https://caselaw.findlaw.com/us-supreme-court/394/731.html
• Wolfe, D., & Hermanson, D. (2004, December). The Fraud Diamond: Considering the Four Elements of Fraud. Retrieved from http://digitalcommons.kennesaw.edu/cgi/viewcontent.cgi?article=2546&context=facpubs