Hospital Industry III
Hospital Industry III
Definition
Hospital is an institution for health care providing treatment by specialized staff and
equipment. It is set up to deal with many kinds of disease and injury and typically has an
emergency ward to deal with immediate threats to health and the capacity to dispatch emergency
medical services.
Income
An Auditor should check the bill book, bill register and copy of bills.
Bills prepared properly according to visit charges of doctors, medicine, stay charges, room rent, etc.
Bills should be verified with the fees/charges structure.
Concession and waiver on account of fees and other charges should be verified.
Bills should be verified with cash receipt book, counterfoil of receipts and cash book.
Verification of arrears of bills should be done.
Unrecoverable arrears should be written off with the approval and consent of proper authority.
Rental income should be properly verified. He should properly vouch property register, arrear of
rent, advance rent and provisions for the same.
Interest and dividend income should be verified with investment register, cash book and share
warrants, etc.
Documents and correspondence relating to donations and grants should be verified; the list of
donors, grant sanction letter should be obtained to verify the same.
Unutilized grant should be verified at the end of the year. In case of non-fulfillment of conditions,
grant will be taken back by the authority.
Distinction between revenue and capital donation should be checked and verified. In case donation
is for some specific purpose, Auditor should assure that the money is used for the same purpose
only.
Expenses
An Auditor should adopt the usual way to vouch purchases and other expenses of the hospitals.
Clear distinction should be made between capital and revenue expenses.
Salary of staff should be vouched according to general auditing principles.
Internal Audit
Challenges
There is difficulty in finding the ‘right talent’. Hiring and keeping the “right kind of talent,” is
internal audit’s greatest challenge.
Matching the skills of internal audit personnel with an organization’s needs and demands.
Most companies reported having too many internal auditors with financial reporting compliance
skills. And some internal auditors are mainly focused on IT functionalities. This leaves gaps in
other significant areas like Fraud prevention and detection, Tax, Controls and transactions. There
is a need for greater focus on matching the skills of internal audit personnel with an
organization’s needs and demands.
Delivering Additional Value. An ongoing challenge for internal audit relates to multiple
stakeholder expectations which, at times, may differ.
Use of technology in Internal audit. There is the need to do a better job at leveraging
technology in internal audit including using data analytics. Many internal audit departments are
struggling to find good IT auditors.
Gaining trust. Trust has to be earned and cannot be solely given on reputation.
Benefits
Internal audit search throughout the organization to appraise activities, at given sufficient
time and resources.
Internal audit is dedicated to improving systems rather than detecting errors.
Hospital departments and processes that are evaluated are also improved.
An internal audit brings a professional level of objectivity and independence to the
facility.
It helps in protecting the assets and reduce the possibility of fraud
It Improves the efficiency in operations
It Increases financial reliability and integrity
Ensuring compliance with laws and statutory regulations
Establishing monitoring procedures
Accounting for Hospital Industry
Areas of Focus
Human Resources
Revenue Cycle Processes
Accounts Payable Processing
Cash Management
Policies and Procedures
Physician Relationships
System Implementations
Ethics and Compliance
External Audit Communications and Co-
Purchasing and Receiving
sourcing
Financial Operations
Other Areas Identified by Management
Revenue or Income
Typical Gains
Specific Purpose Funds – used to account for assets restricted by donors and grantors
Plant Replacement & Expansion Funds – used to account for financial resources restricted by
donors or grantors for capital asset purposes
Endowment Funds – used to account for principal of permanent endowments, term endowments,
and similar gifts.
Questions
D
Government hospital restricted funds include (a) Specific Purpose Funds which is used to
account for assets restricted by donors and grantors, (b) Plant Replacement & Expansion Funds
which used to account for financial resources restricted by donors or grantors for capital asset
purposes, and (c) Endowment Funds which is used to account for principal of permanent
endowments, term endowments, and similar gifts. Only (d) general funds is not a government
hospital restricted fund.
FASB, which stands for Financial Accounting Standards Board, has the authority to establish
and interpret generally accepted accounting principles (GAAP) for public and private companies
and nonprofit organizations. GAAP is a set of standards that companies, nonprofits, and
governments should follow when preparing and presenting their financial statements, including any
related party transactions.
3. Private sector, not-for-profit health care organizations have a category of assets called “Assets Whose
Use is Limited.” That category refers to
a. Only I
b. Only II
c. Both I and II
d. Neither I nor II
B
Assets whose use is limited, classified as an Unrestricted Net Asset, refer to those accounts
used in the equity section of private not-for-profit hospitals to show limitations on the use of assets
due to bond covenant restrictions and governing board plans for future use. This category is
especially important for private sector, not for-profit health care entities because the “restricted”
category is limited to restrictions placed on contributions by the outside donor.
4. The AICPA Audit and Accounting Guide: Health Care Organization applies to
a. I and II
b. II and III
c. I and III
d. I, II and III
All health care organizations follow AICPA Audit and Accounting guidance hence includes (I)
Private not-for-profit health care organization, (II) Government owned health care organization,
and (III) Investor-owned health care organization. Specifically, Government owned health care
organization follows the GASB Guidance while private not-for-profit health care organization and
investor-owned health care organization follows the FASB Guidance. These guidance are under the
said AICPA Audit and Accounting Guide.
Both (a) an internal audit brings a professional level of objectivity and independence to the
facility and (c) an increase in financial reliability and integrity are included in the benefits of
internal audit while (b) multiple stakeholder expectations which, at times, may differ is a challenge
which relates to delivering additional value. Other benefits include improving systems,
evaluation and improvement of hospital departments and processes, protecting the assets,
reducing the possibility of fraud, improving operations efficiency, ensuring compliance
with laws and statutory regulations and establishing monitoring procedures.