Ethical Obligations and Decision Making in Accounting, 4/e 1
Case 4-8 Valley View Hospital
Sue Kolb has been associated with Valley View Hospital in Highlands Ranch, a small town in
Colorado. Kolb is a CPA licensed in Colorado and handles the hospital’s financial affairs; she
climbed the ladder to CFO after 10 years in the accounting department.
In 2012, Valley View’s board of trustees hired Denver-based Bronco Resources, Inc., to manage
the hospital’s operations. Bronco, formerly a division of Hospital Corporation of America
(HCA), claimed that it could maximize the federal government’s reimbursement for hospital
expenses.
Questions
1. Who are the stakeholders in this case, and what are their interests?
The stakeholders and their interests are as follows.
Kolb: Her reputation is on the line as a CPA. She knows keeping two sets of books is
wrong. She can’t stand idly by and allow the fraud to continue. She needs to find a way to
voice her values and change the accounting for Medicare payments.
Valley View: The hospital hired Bronco Resources and is responsible for their actions.
The hospital is cheating the government out of its rightful payments. It has placed itself at
risk for lawsuits by the government.
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2. What are Kolb’s ethical obligations with respect to the Medicare fraud and her
reporting it within Valley View under the AICPA Code of Professional Conduct?
Kolb should follow the steps detailed in Exhibit 3.13 that address what to do when
differences of opinion on accounting issues exist with one’s supervisor. The AICPA
Interpretation provides guidance how to avoid subordination of judgment. Kolb should
bring her concerns to the audit committee of the board of directors. That body is
supposed to oversee financial reporting and support the accountants when differences of
opinion with management exist on accounting matters. In this case it is clear that fraud is
occurring. The board will want to know about it and change the practice immediately.
Kolb can also consider informing the internal auditors and let them do an investigation.
3. What would you do at this point if you were Sue Kolb, and why?
If Kolb is unsuccessful in changing management’s mind about the fraud and nothing
comes out of the internal auditors’ investigation, then she should consider going to the
external auditors and eliciting their help, as did Cynthia Cooper in the WorldCom case.
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day. Kolb has a societal obligation (to the public interest) to do whatever she can to
correct the improper accounting and false reimbursement claims.