Assignment: Independent Auditor

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Assignment: Independent Auditor

Assignment: Independent Auditor

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3. An adverse opinion means that the financial statements do not fairly present the financial position, results of operations, and/or cash flows of the

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I n t r o d u c t i o n ➤ t o ➤ t h e ➤ F i n a n c i a l ➤ M a n a g e m e n t ➤ o f ➤ H e a l t h c a r e ➤ O r g a n i z a t i o n s4 4

organization in conformance with GAAP. Auditors use additional paragraphs after the opinion to describe the reasons for an adverse opinion.

4. A disclaimer of opinion means that the auditor does not express an opinion on the financial statements, usually because the scope of the audit was insufficient for the auditor to render an opinion.

InternAl AudItor

Internal auditors differ from independent auditors in a number of ways. Whereas an inde- pendent auditor is typically a large accounting firm that has a contract with the healthcare organization, an internal auditor is an employee of the organization who usually reports to the controller. The independent auditor’s primary concern is the financial reporting needs of external entities, and the internal auditor’s primary concern is protecting the organization’s assets from fraud, error, and loss. The independent auditor’s responsibilities are limited primarily to financial matters; the internal auditor’s responsibilities include both financial and operational matters. The independent auditor is only incidentally concerned with identifying fraud (i.e., the independent auditor is not looking for fraud but is duty- bound to report any fraud found in the organization to the party that engaged the auditor’s services); the internal auditor is directly concerned with identifying fraud.

AlternAtIve corPorAte structures

As previously mentioned, healthcare organizations are chartered as corporations by the state. Prior to the late 1970s, most healthcare corporations consisted of one corporation or a limited number of corporations. Beginning in the late 1970s, a legal strategy called corporate restructuring became popular in response to increasing economic pressures on healthcare organizations. The purpose of corporate restructuring was to maximize the economic position of the healthcare organization by developing new corporations (see Stromberg 1982).

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