Bluesberry hospital is located in a country where healthcare is free, as the tax
ID: 2780549 • Letter: B
Question
Bluesberry hospital is located in a country where healthcare is free, as the taxpayers fund the hospitals which are owned by the government. Two years ago management reviewed all aspects of hospital operations and instigated a number of measures aimed at improving overall ‘value for money’ for the local community. Management have asked that you perform a review over the measures which have been implemented. Bluesberry has one centralised buying department and all purchase requisition forms for medical supplies must be forwarded here. Upon receipt the buying team will research the lowest price from suppliers and a purchase order is raised. This is then passed to the purchasing director, who authorises all orders. The small buying team receive in excess of 200 forms a day. The human resources department has had difficulties with recruiting suitably trained staff. Overtime rates have been increased to incentivise permanent staff to fill staffing gaps, this has been popular, and reliance on expensive temporary staff has been reduced. Monitoring of staff hours had been difficult but the hospital has implemented time card clocking in and out procedures and these hours are used for overtime payments as well. The hospital has invested heavily in new surgical equipment, which although very expensive, has meant that more operations could be performed and patient recovery rates are faster. However, currently there is a shortage of appropriately trained medical staff. A capital expenditure committee has been established, made up of senior managers, and they plan and authorise any significant capital expenditure items.
Required: Describe TWO substantive procedures the external auditor of Bluesberry should use to provide evidence for each of the following assertions in relation to this entity’s property, plant and equipment: i. Valuation ii. Completeness iii. Rights and Obligations
Explanation / Answer
The external auditor has to concentrate on the purchases records, the human resources and the time spent working by the employees. Another area of concern is the qualification of the employees in the hospital.
For the purchase department, the external auditor needs to carry out financial statement audit. It examines whether all the financial transactions have been recorded properly in the financial statements or not. It also ensures that the accounting principles are followed while recording these transactions.
For the human resources, the external auditor has to conduct an Operational audit. This will help to understand the activities of the hospital and how well the employees of the hospital are able to carry out these activities. The assessment of the performance of the employees can be done in the operational audit. This will also address the issue of shortage of appropriately trained medical staff in the hospital.
The property, valuation, plant and equipment related matters can be taken care of by the financial statement audit as it includes the assets of the organization. The rights and obligations will be dealt with in Compliance audit. In this the auditor will ensure that the hospital follows all the rules, regulations, principles and values that it has stated.