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Health Care Organizations — AICPA Audit and Accounting Guide

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Description

Understand the unique considerations for financial statements of health care organizations with this authoritative accounting and auditing resource essential to financial managers and auditors operating in the industry. Updated with conforming changes as of May 1, 2007 including the new Risk Assessment Standards.

Table of Contents

  • Unique Considerations of Health Care Organizations
    • Overview
    • Classification of Health Care Organizations
    • Financial Reporting of Nongovernmental Health Care Organizations
    • Financial Reporting of Governmental Health Care Organizations
      • GASB Statement No. 34 and Related Pronouncements
      • Management’s Discussion and Analysis
      • Measurement Focus and Basis of Accounting
      • Statement of Net Assets or Balance Sheet
      • Statement of Revenues, Expenses, and Changes in Net Assets/Equity
      • Statement of Cash Flows
    • Revenue From Health Care Services
    • Third-Party Payor Considerations
    • Classification and Reporting of Net Assets
    • Health Care Contracting
    • GAAP Hierarchy for Not-for-Profit Organizations
      • APB Opinion No. 16, Business Combinations
      • Provisions of Certain Pronouncements Concerning Financial Statement Display
    • GAAP Hierarchy for Governmental Organizations
    • Appendix A - Financial Reporting Pronouncements That Specifically Exempt Not-for-Profit Organizations From Their Application
    • Appendix B - Financial Reporting Pronouncements That, by the Nature of Their Subject Matter, Generally Do Not Apply to Not-for-Profit Organizations
    • Appendix C - Financial Reporting Pronouncements Whose Application to Not-for-Profit Organizations Is Subject to Additional FASB or AICPA Guidance
    • Appendix D - Financial Reporting Pronouncements Pertaining to Specialized Industry Practices of Business Enterprises
    • Appendix E - Financial Reporting Pronouncements Not Subsequently Superseded and Not Included in Appendixes A through D of This Chapter
    • Appendix F - All Financial Reporting Pronouncements, Cross-Referenced by Appendix
    • Appendix G - The Hierarchy of GAAP
  • General Auditing Considerations
    • Auditing Guidance in the Audit and Accounting Guide State and Local Governments
    • Registered Public Accounting Firms
    • Overview
    • Planning and Other Auditing Considerations
      • Audit Planning
      • Individual Practice Associations
      • Scope of the Engagement
      • Audit Risk
      • Planning Materiality
      • Use of a Specialist
    • Use of Assertions in Obtaining Audit Evidence
    • Understanding the Entity, Its Environment, and Its Internal Control
      • Risk Assessment Procedures
      • Analytical Procedures
      • Discussion Among the Audit Team
      • Understanding of the Entity and Its Environment
      • Understanding of Internal Control
    • Assessment of Risks of Material Misstatement and the Design of Further Audit Procedures
      • Assessing the Risks of Material Misstatement
      • Designing and Performing Further Audit Procedures
      • Evaluating Misstatements
    • Consideration of Fraud in a Financial Statement Audit
      • The Importance of Exercising Professional Skepticism
      • Discussion Among Engagement Personnel Regarding the Risks of Material Misstatement Due to Fraud
      • Obtaining the Information Needed to Identify the Risks of Material Misstatement Due to Fraud
      • Identifying Risks That May Result in a Material Misstatement Due to Fraud
      • A Presumption That Improper Revenue Recognition Is a Fraud Risk
      • A Consideration of the Risk of Management Override of Controls
      • Assessing the Identified Risks After Taking Into Account an Evaluation of the Entity’s Programs and Controls That Address the Risks
      • Responding to the Results of the Assessment
      • Evaluating Audit Evidence
      • Responding to Misstatements That May Be the Result of Fraud
      • Communicating About Possible Fraud to Management, the Audit Committee, and Others
      • Documenting the Auditor’s Consideration of Fraud
      • Practical Guidance
    • Additional Audit Considerations
      • Accounting Estimates
      • Transactions Processed by Service Organizations
      • Illegal Acts
      • Clinical Coding Validations
      • Going-Concern Considerations
      • Audit Documentation
      • Dating of the Auditors Report
      • Audits Conducted in Accordance With PCAOB Standards
      • Communication of Matters Related to Internal Control
      • Communication With Those Charged With Governance
    • Single Audit Act and Related Audit Considerations
    • Statutory Reporting Considerations for Managed Care Organizations
      • Risk-Based Capital Requirements
      • Codification of Statutory Accounting Practices for Managed Care Organizations
  • Cash and Cash Equivalents
    • Accounting and Financial Reporting
    • Agency Funds
    • Disclosures
    • Auditing
  • Investments
    • Accounting
      • Investments in Debt Securities and Certain Equity Securities
      • Transfers of Assets to a Not-for-Profit Organization or Charitable Trust for Investment
    • Financial Statement Presentation
      • Entities Subject to FASB Statement No. 115, FASB Statement No. 124, or GASB Statement No. 31
    • Auditing
  • Receivables
    • Rate Setting
    • Estimated Final Settlements
    • State Waiver Contingencies Under Medicare
    • Premiums and Stop-Loss Insurance Receivables
    • Promises to Give in Future Periods (Pledges)
      • Governmental Health Care Organizations
  • Cash and Cash Equivalents
    • Accounting and Financial Reporting
    • Agency Funds
    • Disclosures
    • Auditing
  • Investments
    • Accounting
      • Investments in Debt Securities and Certain Equity Securities
      • Transfers of Assets to a Not-for-Profit Organization or Charitable Trust for Investment
    • Financial Statement Presentation
      • Entities Subject to FASB Statement No. 115, FASB Statement No. 124, or GASB Statement No. 31
    • Auditing
  • Receivables
    • Rate Setting
    • Estimated Final Settlements
    • State Waiver Contingencies Under Medicare
    • Premiums and Stop-Loss Insurance Receivables
    • Promises to Give in Future Periods (Pledges)
      • Governmental Health Care Organizations
    • Financial Statement Presentation
      • Accounts Receivable
      • Interfund Receivables
      • Promises to Give in Future Periods (Pledges)
    • Auditing
      • Accounts Receivable Confirmations
  • Property and Equipment, Supplies, and Other Assets
    • Overview
    • Accounting
    • Financial Statement Presentation
    • Auditing
  • Current Liabilities, Tax Considerations, and Long-Term Obligations
    • Overview
    • Accounting
    • Tax Considerations for Not-for-Profit Health Care Organizations
    • Tax-Exempt Entities
    • Private Inurement
    • Unrelated Business Income Tax
    • Financial Statement Presentation
    • Long-Term Debt
    • Financing Authorities
    • Assets Whose Use is Limited
    • Advance Refundings
    • Arbitrage Rebate Liabilities
    • Auditing
  • Commitments and Contingencies
    • Overview
    • Medical Malpractice Claims
    • Accruing Malpractice Liabilities
    • Accounting for Claims-Made Insurance Policies and Tail Coverage
    • Accounting for Retrospectively Rated Premiums
    • Accounting for Medical Malpractice Claims Insured by Captive Insurance Companies
    • Accounting for Trust Funds
    • Governmental Health Care Enterprises
    • Auditing Commitments and Contingencies
    • Auditing Medical Malpractice Loss Contingencies
    • Auditing Accounting Estimates
    • Use of Actuaries and Actuarial Methods
    • Risks and Uncertainties
    • Evaluating Lawyers’ Responses
    • Auditing
  • Net Assets (Equity)
    • Investor-Owned Health Care Organizations
    • Not-for-Profit Health Care Organizations
    • Governmental Health Care Organizations
    • Auditing
  • Revenue, Expenses, Gains, and Losses
    • Conceptual Framework for Reporting Revenue, Expenses, Gains, and Losses
    • Distinguishing Charity Care From Bad Debt Expense or Allowance
    • Revenue
    • Expenses
    • Financial Statement Presentation
    • Auditing
  • The Reporting Entity and Related Organizations
    • Overview
    • Financial Reporting of Governmental Health Care Entities
    • Financial Reporting of Nongovernmental Health Care Entities
    • Transfers
      • Equity Transfers
      • Equity Transactions
      • Transfers
    • Related Fund-Raising Organizations
    • Disclosure
    • Business Combinations
    • Auditing
  • Independent Auditor’s Reports
    • Overview
    • Unqualified Opinion
    • Qualified Opinion
    • Additional Information
    • Auditor Reporting on Required Supplementary Information and Supplementary Information for Governmental Health Care Entities
    • Special Reports
    • Corporate Compliance Programs
  • Financial Accounting and Reporting by Providers of Prepaid Health
    • Overview
    • Accounting for Health Care Costs
    • Accounting for Loss Contracts
    • Accounting for Stop-Loss Insurance
    • Accounting for Contract Acquisition Costs
  • Financial Accounting and Reporting by Continuing Care Retirement
    • Overview
    • Types of Contracts
      • Type A Contracts
      • Type B Contracts
      • Type C Contracts
    • Types of Living Accommodations
    • Fees and Payment Methods
      • Advance Fee Only
      • Advance Fee With Periodic Fees
      • Periodic Fees Only
    • Accounting for Refundable Advance Fees
    • Accounting for Fees Refundable to Residents Only From Reoccupancy Proceeds of a Contract Holder’s Unit
    • Accounting for Nonrefundable Advance Fees
    • Accounting for the Obligation to Provide Future Services and the Use of Facilities to Current Residents
    • Accounting for the Costs of Acquiring Initial Continuing-Care Contracts
    • Financial Statements
    • Auditing
  • A. Illustrative Financial Statements
  • B. Background Information and Basis for Conclusions
  • C. Statement of Position 98-2, Accounting for Costs of Activities of Not-for-Profit Organizations and State and Local Governmental Entities that Include Fund Raising
  • D. Statement of Position 99-1, Guidance to Practitioners in Conducting and Reporting on an Agreed-Upon Procedures Engagement to Assist Management in Evaluating the Effectiveness of Its Corporate Compliance Program
  • E. Statement of Position 00-1, Auditing Health Care Third-Party Revenues and Related Receivables
  • F. Statement of Position 02-2, Accounting for Derivative Instruments and Hedging Activities by Not-for-Profit Health Care Organizations, and Clarification of the Performance Indicator
  • G. Information Sources
  • H. References to AICPA Technical Practice Aids
  • I. Schedule of Changes Made to Health Care Organizations
  • Glossary

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Excerpts

Preface

Purpose
This guide has been prepared to assist providers of health care services in preparing financial statements in conformity with generally accepted accounting principles (GAAP) and to assist independent auditors1 in auditing and reporting on those financial statements.

Applicability
This guide applies to health care organizations that are either (a) investorowned businesses or (b) not-for-profit enterprises that have no ownership interest and are essentially self-sustaining from fees charged for goods and services, as defined in Financial Accounting Standards Board (FASB) Statement of Financial Accounting Concepts No. 4, Objectives of Financial Reporting by Nonbusiness Organizations, paragraph 8,2 or (c) governmental. This guide applies to organizations whose principal operations consist of providing or agreeing to provide health care services and that derive all or almost all of their revenues from the sale of goods or services; it also applies to organizations whose primary activities are the planning, organization, and oversight of such organizations, such as parent or holding companies of health care providers.

This guide applies to the following types of health care organizations:

  • Clinics, medical group practices, individual practice associations, individual practitioners, emergency care facilities, laboratories, surgery centers, and other ambulatory care organizations
  • Continuing care retirement communities (CCRCs)
  • Health maintenance organizations (HMOs) and similar prepaid health care plans
  • Home health agencies
  • Hospitals
  • Nursing homes that provide skilled, intermediate, and less intensive levels of health care
  • Drug and alcohol rehabilitation centers and other rehabilitation facilities

This guide also applies to integrated delivery systems that include one or more of the above types of organizations.

This guide does not apply to voluntary health and welfare organizations, as defined in FASB Statement No. 117, Financial Statements of Not-for-Profit Organizations. These organizations should follow the AICPA Audit and Accounting

Guide Not-for-Profit Organizations. Related fund raising foundations that meet the definition of a not-for-profit organization given in FASB Statement No. 117 also should follow the AICPA Audit and Accounting Guide Not-for-Profit Organizations.

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Paperback 2007
Product# 012617
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