REPORTING PRACTICES AND ETHICS 5
ReportingPractices and Ethics
Healthcare has been rationalized with financial ethical standards andpractices. Organizations are expected to report their financial dataaccurately and in compliance with the set ethical standards andprinciples. These standards are formulated by differing bodies ofprofessional finance and accounting organizations. The main goal ofthese standards is to pursue competence, confidentiality, andobjectivity in financial reporting practices. As such, it is prudentfor health care organizations to be well versed with the principlesof finance and the related ethical standards, all of which fall underthe branch of financial management.
Typically,the main elements of financial management include planning,directing, decision making, and controlling of financial activitiesin an organization. Financial planning is concerned with ensuringthat adequate finances and resources are availed on time to meet theneeds of an organization. Financial control is liable for ensuringthat a business meets its set objectives and goals by making surethat assets are secured and utilized efficiently. It ensures that themanagement is able to act in the best ways possible to meet theinterests of all the shareholders. Financial decision making, on theother hand, relates to financing, dividends, and investment. Thisaspect claims that investments should be financed using variouspossible ways. It also involves making decisions on what to do with acompany’s profit. Finally, organizing and directing entailsdeciding what resources are effective for certain purposes and howthey should be used. The main goal of this is to ensure that anorganization runs smoothly and effectively (Medical Office, 2014).
Accordingto Accounting Department (2014), financial ethics and practicestandards follow the Generally Accepted Accounting Principles (GAAP).This refers to the general rules, regulations, and guidelines thatall professional accountants must follow to ensure that theirpractices are ethical and legal. It sets out the standards forpreparing financial statements, managing accounts, and otheraccounting techniques and methods. The following are the mainprincipals or guidelines for financial management as mandated byGAAP
Regularity- financial managers should ensure that accounts and books are updated on time, and more importantly ensure that tax returns and information is given on time.
Consistency- accounting techniques and methods must remain the same in a financial year.
Sincerity- accountants should be truthful and must accurately express true financial stability of the clients.
Permanence of methods- this ensures that all financial methods and information must be presented coherently and clearly.
Permanence of methods- financial information must be accurately presented and a negative should not be compensated with a positive. All should be shown in full.
Continuity- accountants should continuously present an updated value of assets having in mind that over time assets are bound to change in value.
Prudence- accounts should not be based on assumptions or probability.
Periodicity- accountants should allocate revenue over the whole span of its income and not just in the final time of transaction.
Full disclosure and materiality- everything that is financially related to an organization should be presented in the records.
Anumber of companies have faced accounting irregularities. Forexample, HealthSouth and Lehman Brothers were at some point facedwith huge financial accounting scandals that jeopardized theirreputations. HealthSouth is a corporation that deals withacquisitions of rehabilitation clinics, nursing homes, outpatientsurgical care operations, and other health care companies. Between1996 and 2003, the company was involved in an accounting irregularitywhereby it came up with fictitious accounts and transactions to boostthe earnings of the company. This fraud embezzled a total of $1.4billion in the aforementioned periods. The company had misstated itsactual revenue so that the CEO would pocket the balance. This scandalscared away some investors while the public obtained a low opinionover the great company. The CEO was charged with accounting frauds,and was later on sued by investors who ordered him to repay hiscompany. Although the company is back on its feet, the reputation ofthe company is still at stake thus, it is not able to attract moreinvestors than it did before.
Theother company that has been involved in accounting problems is theLehman Brothers in 2008. The global financial services firm hid over50 million dollars in loans that were disguised as sales. Itallegedly sold toxic assets with an agreement that they would bereturned later on. It created an impression that it had 50milliondollars more cash and 50 million dollars less in toxic assets. Thisaccounting irregularity erupted when the company went bankrupt. Thisbankruptcy was recorded as the largest in the history of U.Sconsidering that the previous year it was ranked number one in themost admired companies. This was devastating because all thestakeholders were greatly affected by the collapse of the business.Even though the company was sued, there was no staunch evidenceagainst it. As such, the investors incurred losses as the employeeswere left jobless. This came as a shock to the public who previouslyviewed the company with great admiration.
Accountingdepartment. (2014). GAAP Compliance. Retrieved fromhttp://www.accountingdepartment.com/GAAP-Compliance-Applying-Accounting-Best-Practices-To-Your-Business/
MedicalOffice. (2014). The Role of Accounting in the Medical office.Retrieved fromhttp://medicaloffice.about.com/od/reimbursements/a/The-Role-Of-Accounting-In-The-Medical-Office.htm