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Forensic Accounting, Forensic Techniques, and Fraud Detection Copyrighted 2001 D. Larry Crumbley, ... - page 213 / 352

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© D.L. Crumbley

Sales v. Net Income

Forensic accountants should compare the trend in sales with the trend in net income.

For example, from 1999 to 2001, HealthSouth’s net income increased nearly 500%, but revenues grew only 5%. On March 19, 2003, the SEC said that HealthSouth faked at least $1.4 billion in profits since 1999 under the auditing eyes of Ernst & Young.

The SEC said that HealthSouth started cooking its numbers in 1986, which Ernst & Young failed to find over 17 years. HealthSouth also inflated its cash balances.

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