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Use caution when relying on independent auditors' work

Compliance Monitor, January 14, 2004

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If your independent auditor conducts an annual audit, review the working papers to establish their reliability. This review can reduce the need for testing and duplicating auditing and monitoring, and let you concentrate on other areas.

However, use caution when relying on an auditor's work. Use the data obtained from the auditor in the following areas when you do an internal audit or compliance review:

1. Internal controls

2. Organizational structure

3. Operations

The following will help you decide whether you can use your auditor's work by itself, or whether you need to do your own audit:

A. Determine if the auditor qualified any of the prior year audit reports

B. If the reports were qualified, review the items noted and the reason for the qualification to determine if there are any Medicare cost reimbursement implications

C. Ascertain if management letters noted deficiencies in the accounting system, and if the deficiencies were corrected

D. Review audit working papers related to asset, liability and fund balance accounts to determine if an adequate review of the accounts was made

E. Review your organization's federal income tax return for possible income and expense items, which could affect Medicare reimbursement

F. Determine the method used to report and accumulate payroll

Performing this review will avoid duplicating work and provide some assurance that you can rely on your auditor's work and focus on other things.

This column was written by Hank Vanderbeek, MPA, CIA, CFE. IRP, Inc. - an Innovative Health Solutions company

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