Financial Reporting Practices Financial Reporting Practices Health Care Financial Accountin September 7, 2011 Ethical standards in financial reporting are essential. Tools have been set in place to ensure that this takes place. Some of these tools are agencies that have been established, elements of financial management, and Generally Accepted Accounting Principles. Several administrative agencies have been established to strive to create a more standardized and ethical standard within the financial practices.
These agencies are the United States Securities and Exchange Commission, the Financial Accounting Standard Board, and the Public Company Accountant Oversight Board. The Securities and Exchange Commission was established in 1934. It was necessary to be able to guarantee that the market would be stabilized and protected. There are four elements of financial management. The elements of financial management are planning, controlling, organizing and directing, and decision making. Each step is part of a role that the financial manager must take in order to ensure the success of the business.
In planning objectives that are laid out by the organization are identified. This allows for a clear path to be established that all will follow. Controlling is the part where the financial manager ensures that the objectives set forth are followed. A financial manager must manage the resources of the organization. This is referred to as organizing and directing when looking at the four elements of financial management. Finally decision making occurs. This is not the final step as it is more something that needs to be continually executed throughout and in conjunction with the other elements of financial management.
Simply put it is where all choices start by being informed. The four elements of financial management are important and serve a necessary purpose. There are multiple Generally Accepted Accounting Principles often abbreviated as GAAP. Simply GAAP is a set of general rules, regulations and guidelines that must be followed. The United States accountants must follow GAAP to ensure that their practices fall in line with the laws, both legal and ethical. It also sets forth methods and techniques that must be used in accounting, what is expected when managing the accounts, and preparing the financial statements.
GAAP are issued and governed by the Financial Accounting Standards Board and the International Accounting Standards Board. This helps ensure that worldwide equal and relative standards are provided. There are some main principles of GAAP. These main principles help us be free of inconsistencies within the accounting procedures. Among these is regularity which ensures that there is a timely manner that things are done in, mostly referring to tax returns. Ensuring that things stay the same is consistency and is important. Reporting things factually without fluff is sincerity.
Permanence of methods is to ensure the transparency of all things. Prudence is factual reporting versus working on assumptions or maybes. Non compensation refers to showing the financial information, and a negative can not be eliminated by a positive. Things will depreciate with time and reporting this is continuity. Accurately reporting and noting the entire time span of expenses is periodicity. Finally full disclosure and materiality is making sure there is no omission within the records. All of these practices are very important within the health care field.
This is demonstrated strongly within the psychiatric field where fraud and abuse is a huge problem. Each year the United States government provides huge amounts of funds, in to the billions of dollars, to aid in the treatment of mental illness. The industry then turns around and demands additional funds to continue to improve the state of the mental health field. The fraud that takes place within this area of the health care field amounts to more than a hundred billion dollars every year. Mark Schiller, president of the American Association of Physicians and Surgeons, admitted: “I have frequently seen psychiatrists diagnose patients ith a range of psychiatric diagnoses that aren’t justified, to obtain [insurance] reimbursements. ”(Eastgate) This is a huge problem and very significant due to the fact that the healthcare field is already failing in its ability to provide everyone with ample health care. When the amount of money wasted could enable others to receive the health care that is needed changes need to occur. Waste is an opportunity missed that could have made a difference is the services provided due to what is available or who can receive them.
Almost one hundred billion dollars is lost in the health care field due to fraud each year. Of this about twenty billion of the loss is found within the smallest sector of the health care field, mental health industry. When we take a look at the top twenty fraud cases against the United States government we see that those cases are primarily composed of healthcare fraud cases. The number one fraud offense, by dollar amount, was by Pfizer. Pfizer paid out a criminal fine in the amount of one point three billion for kickbacks and of-label marketing.
Another one billion was paid under the False Claims Act. It is then seen that the number two through four top cases all fell under the False Claims Act. The companies involved were Tenet Healthcare, HCA formerly known as Columbia HCA, and Merck. All of these companies were either found guilty or settled in cases against them. The fact that is prevalent when we look at the healthcare field is that fraud is there and must be dealt with. In cases of fraud against the government we see that ninety-five percent involve companies within the healthcare industry. This is phenomenal and must be stopped.
The significance of the numbers presented is great. The bottom line is it hampers the health care that the people as a whole receive. As we move into the future we need to strive to offer better care to those receiving it and strive to offer it to those not yet receiving it. References (n. d. ). Integrity of Accounting Information. Retrieved from http://highered. mcgraw-hill. com/sites/0072996501/student_view0/ebook/chapter1/chbody3/integrity_of_accounting_information. html on September 4, 2011. Eastgate, J. (n. d. ). Massive Fraud: Psychiatry’s Corrupt Industry.
Retrieved from http://www. cchr. org/cchr-reports/massive-fraud/introduction. html September 5, 2011. Maughan, J. (n. d. ). What Are The Generally Accepted Accounting Principles? Retrieved from http://www. life123. com/career-money/careers/accounting/accounting-principles. shtml September 4, 2011. Soeken, Dr. D. (n. d. ). Huge Percentage of Financial Fraud Against U. S. Government Comes From Healthcare Industry. Retrieved from http://my. firedoglake. com/deepharm/2011/06/06/huge-percentage-of-financial-fraud-against-u-s-government-comes-from-healthcare-industry/ September 4, 2011