Tools for Business Decision Making

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Read Ch. 7 of Accounting: Tools for Business Decision Making (6th ed.).

1. Read Ch. 7 of Accounting: Tools for Business Decision Making (6th ed.). Write your thoughts on the chapter between 90-100 words

2. Respond back to question between 110-125 words) Let’s think about the fraud triangle and the three most prevalent reasons for fraud. They are opportunity, pressure, and rationalization.

In health care we hear often about fraudulent billing practices. The Medicare prospective payment system that was implemented in 1999 came about as a result of companies such as therapy companies taking advantage of the “old” cost based system that health care operated under up until that point in time. Under the old cost based system, health care entities got reimbursement based upon their costs (payments were made based on the previous year’s cost report that more or less rewarded companies for spending more money in their Medicare units). There were such uneven distribution of Medicare dollars from company to company, and there were those who took advantage and charged Medicare way too much money. Today we see fraud in improper billing practices such as upcoding in order to get more money when the medical record does not support the data.

In health care it is very important to make sure that documentation appropriately reflects patients’ medically necessary needs. In this way correct dollars are received for care given. Billing practices for maximum revenue are areas that could be subject to the fraud triangle, and because of this it’s important that documentation is continually audited and that staff gets good training.

Class: What are some processes you would have in place, or what have you encountered, to be sure that documentation is accurate so that appropriate revenue will be gained? Please discuss.

3. Respond back to post between 110-125 words) A company will have several internal control processes for all areas within the company as safety measures to ensure the company is compliant with all regulatory requirements they are required to adhere too. One of the important steps a company needs to take to accomplish this besides developing policies and procedures, completing analyzes to identify risks, and complete internal audits as a way to monitor is to have an environment that is ethical which is supported by executives. One way to accomplish this is if the company’s code of conduct speaks to the company values of ethics, integrity, and defines what behavior is acceptable vs not acceptable. There are other controls that can also be implemented like restricting access based on role of the employee or assigning tasks to certain employees to reduce conflicts of interest. For example, an employee that is able to process payments and apply them to the patient’s account would not have access to issue a refund or write off a balance. This would minimize the risk of the employee issuing refunds to themselves or adjusting a balance for the amount of the payment.

4. Respond back to question between 110-125 words) You’re right about opportunity being one reason an employee commits fraud. The avenue must be present in order for a fraudulent act to occur. Let’s think about what might happen if there is a suspicion but not evidence.

We’re learning that auditors/CPA’s use GAAP standards in financial state preparation and analysis. So when audited financial statements are complete, we might think that all of the CPA’s responsibilities are complete too. Let’s look at a case and rethink what the responsibilities of the auditor and top management are.

Unfortunately there are occasions when an employee might be doing the wrong thing with accounts, and when this is the case auditors can often sense that something is amiss before the wrongdoing is discovered. Wolfe and Ference (2013) recommend that auditors document the advice that they give clients. A case in point is one where the CPA verbally discussed weaknesses in a business’ accounts payable system only to discover some time later that embezzlement was going on by the CFO and vendors. A lawsuit resulted because the company said that the CPA never informed them of the weak A/P system (Wolfe & Beckett, 2013).

If auditors do document the advice they give clients on an informal basis, then I think this can be a good internal control for the business as well as protection for the CPA. When things are in writing, management has a due diligence to address and consider issues that they might otherwise put aside.

Class: Can you share your experiences of going through an audit, or perhaps conversing with auditors? Please give examples of advice they might have given you that helped you do a better job. If you were the company leader, what might you do with information an auditor gives you such as a suspicion?