Principles of Health Care

Audits are used for evaluating organizations, persons, products or systems. Internal and external both type of audits are considered as important factors in the financial working of any organization or system. In this paper we would discuss the difference between internal and external audits and why these two audits are necessary in an organization. The integrity of financial management is dependent on internal and external audit and both of them are considered to be the main aspects of financial management. Besides other sectors both these audits are quite necessary in health care management.

The responsibilities on internal audit include elements like developing and implementing a flexible annual audit plan, providing a list of significant and measureable goals and the final result to the audit committee. The additional responsibilities of internal auditors are operations, services, controls and fraudulent activities. Similarly, other functions of internal auditors are developing objectives, plans and programs for the organization and dealing with regulatory issues and managing the financial, managerial and operational issues.

The internal control of an organization is managed by the internal organization. Internal audit basically is perceived as a necessary evil and some organization treat this as unnecessary evil. The internal audit is not only about control and prevention it reduced costs and the enhanced nature of revenues can also be considered as the realistic objectives of internal audit. In the health care organization both of these functions are widely used and since health care organizations have a certain level of responsibility to the public that is the reason why audit is necessary in organizations related to health care.

The financial managers of health care auditors have a legal duty that the organizations business must operate effectively and in accordance to the rules and regulation of the law. Similarly, financial results must be reported accurately and in the entire organization especially the finance department must be free from frauds and financial mishaps. Due to ineffective policies and lack of disclosing the correct information the US government has imposed increased internal controls and laws like Sarbanes Oxley act and etc.

In the scenario of health care provider the internal auditors of the organization examines the effectiveness and the efficiency of materials management systems. If the functions of internal audit are implemented properly then it actually ensures enhanced compliance. Internal auditors in a health care organization can manage the financial aspects related to pharmacy and it possesses the authority to recover lost payments.

Therefore an organization can experience many benefits from internal auditors which include minimizing the regulatory and compliance risk in day to day business operations (Griffith). External audit is considered to be another important factor for different organizations. An external audit is basically the examination of an organizations entire financial statement that is derived from accounting processes. The external audit is generally performed by a certified public accounting firm (CPA) and whose core objective is to express their view on the financial statements of a certain organization.

In the health care industry the external audit is usually required by a third part and one of the main objectives of healthcare organizations external audit is that public and private required audited financial statements. External organizations like Blue Cross might require audited statements as a result of state regulations. The external auditor must provide an individual view point on the entire financial statements of the organization. Similarly, not-for-profit health care organizations receive certain funds in the form of gifts, grants and from other different sources.

That’s why institutions like public agencies, businesses have vested interests in these organization and they possess the right to view and receive the necessary regulatory and financial statements of these health care organizations. For this very reason external audit is used and these audits gives confidence to general public and other organizations that no loop holes are present in the financial structure of that health care organization (Griffith). Conclusion Therefore we can conclude that audit in an industry is an essential element and both internal and external audit can be considered as the part and parcel of financial management.

Managing financial statements is not an easy job and these internal and external auditors manage and the financial statements and they correspond to the disclosure requirements of the industry. A well directed internal and external audit program can benefit the organization in both the short and the long run and other entities related entities like government and general public would consider the financial statements of audited organizations as a viable source of information.

The internal auditor reports to the chief financial officer and they usually maintain an independent stance but they cannot enjoy the same degree of independence which the external auditors have. However, if the external audit department of an organization is strengthened by the individuals then it can help the organization in minimizing the cost of external audit. Works Cited Griffith, J. R. The Well Managed Health Care Organization. Chicago: Health Administration Press, 2007.

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