The primary objective of auditing is to produce a report by the auditor on the truthfulness and fairness of the financial statements presented by management PDF

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The primary objective of auditing is to produce a report by the auditor on the truthfulness and fairness of the financial statements presented by management. So that the users of such information can believe in them. However, the amount of such examinations carried out by the auditor depends upon circumstances surrounding each case. Audit engagement involves collaborative efforts from the auditors and the client being audited. This form of collaboration does not change being it private sector or public sector auditor. Each party to the audit engagement has their own specific responsibilities which they will need to perform at each stage of the audit process. Below are the procedures the auditor and the hospital (Client) will go through out the audit period. 

Audit planning; this stage encompasses setting the objective and scope of audit, risk assessment, understanding the industry and selection of audit strategy. The role of the hospital here is to make available information relevant to the audit planning processes being requested by the auditors. The auditor is responsible for most of the activities involved in this stage of the audit process. The auditor at this stage seeks to understand the nature and dynamics of the health sector. This understanding helps to identify the risk associated with the operation of the hospital. There is also assessment of the internal control of the hospital to identify any weakness which must be taken into consideration during the field work.

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Field work: This where actual audit work take place. The hospital being non-profit organizations, it prepare Receipt & Payment account, Income & Expenditure account and statement of financial position; following are various items that fall under income and expenditure in the hospitals. Income (Room Rent, Medical Care, Dentistry Charges, Delivery Room Charges, Anesthesia Charges, Laboratory Charges, Grants for Operating Needs of Hospital ,Grants) Expenditure (Electricity & Water Charges, Pharmacy Charges ,Salaries and Wages etc.). i.

The field work begins with the preliminary audit. The Auditor here should obtain a list of books, documents, register and other records as maintained by the Hospitals. He should examine the audit report of last year and should note down qualifications, if any. He should examine the system of receiving grants and donations, whether received through cheque or otherwise.

He should note down the important decisions concerning the financial transactions relating to fixed assets, investment and financial powers as required by him during his audit. He should examine the internal control system regarding purchase of fixed assets, medicines, stores, consumables, clothing and provisions, etc. He should examine the internal control system for recording of purchases, issue and storage of all items and physical verification of them. He should obtain the rate structure for fees, medicine and other services, power to do concession or waiver of fees. There hospitals responsibility here also is to make available documents and personnel requested for enquiries. ii.

Audit of Expenses of the Hospital, this involves vouching of expenses, review of payment vouchers, invoices and receipts. The Auditor should adopt the usual way to vouch purchases and other expenses of the hospitals. A clear distinction should be made between capital and revenue expenses. Salary of staff should be vouched according to general auditing principles.

iii.

Audit of assets and liabilities, Title documents and other records relating to land and building should be carefully examined by the Auditor. Resolution of Board of directors should be verified for sale and purchase of fixed assets. Depreciation should be reviewed to check compliance with the hospital’s policy. The Auditor should physically verify the investments like shares, debentures, bonds and security certificates. He should also verify them with the investment register.

iv.

Audit of income, this involving ensuring that the income reported has been correctly recognised and presented based on the adopted reporting framework of the hospital. The Auditor should check the bill book, bill register and copy of bills. It should be verified that bills are prepared properly according to visit charges of doctors, medicine, stay charges, room rent, etc. Bills should be verified with the fees or charges structure. 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. 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. 

Communication of findings to management. This is where the auditors meet the management of the hospital and discuss issues identified during the audit. The auditors at this stage seek further explanation to unresolved issues which can be dealt, which must not necessarily appear in the audit report. Also weakness in the internal controls of the hospitals identified during the audit will be communicated to management and recommendation will made when appropriate.

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Report Issuing ;The objective of financial audit is to express an opinion through the auditor’s report stating whether financial statement has been fairly and truly presented in compliance with reporting framework of the entity. The auditor will issue a report, stating his opinion about the financial statement of the hospital based on the evidence gather during the audit.

Q2. An unearned salary is a salary that is paid to a person who did not work for it. Once the person did not work for it, he or she did not earn the salary. Salaries must be earned through work activities and not just paid for work not done. People who take unearned salaries are often termed as “ghosts” on the public sector payroll. These people may be workers who died, retired, vacated post, resigned, took leave without pay or people who are not public sector employees at all. Regulation 297 (1) of the Financial Administration Regulation 2004, (LI 1802) requires ” a head of department to cause the immediate stoppage of payment of salary to the public servant when the public servant has retired, resigned or vacated post”. By the provision of the law I do agree with the positon of the auditors that Kukuwa should refund the unearned salary received but only up to the amount received which is the net of tax not the gross the auditors are stipulating...