Discuss the audit consideration (both operation and accounts) in conducting an

external audit on Hospitals and HMOs as mentioned and discussed by the

resource speaker.
If you have additional audit consideration(s) that were not mentioned by the
speaker, please include it in your discussion. Comment your name, section and
answer below.

As mentioned by the speaker, Ms. Ma. Teresita Dimaculangan, there are six elements
that should be considered by an auditor in conducting external audit of Hospital and
HMOs in both of their operations and accounts.

AUDIT OF HOSPITAL AND HMO OPERATIONS

1. Leadership and Governance - The audit in hospitals and HMOs can pose some
challenges. However, with proper consideration of the good leadership and
governance of the entity, these audits should not necessarily be more complex or
challenging to plan and perform. The auditor should know the prevalent inherent
risks that is included in the objectives or assertions when auditing. These
prevalent inherent risks include prevention of lost revenues, protect against
fraudulent claims in the billing activities, guard against reimbursements
deficiencies on documentations and check frequencies or opportunities for
reimbursable.

2. Health and Health Care Financing – For this element, the auditor should inquire
about the “rate structure of fees” and the ‘discount policy’ for in house/out
patients and how it affects the billing and settlement. Concessionaire agreements
and sharing schemes should also be reviewed by the auditor. The procedures for
SSS, Phil health claims or deductions, application of credit card payments and
utilization of medical insurance should also be taken into account by the auditor.

3. Health Care Workforce – There is a high turnover healthcare workforce that can
really have an adverse effect in the delivery of services, where the ratio of nurses
to patients are such that nurses experience “burned-out”. Also, the high cost of
training, mentoring and coaching new and experienced personnel in terms of
monetary and time spent. Creating work environment is also a thing, where
employees are encouraged to pursue goals is more important than providing
competitive pay is a challenge.

4. Access to Medicine and Technology – When auditing, the auditor should

establish o check internal controls on procurement/purchasing of assets,
medicines, importation of sophisticated (state-of-the-art) medical equipment,
 storage of inventory items and its issuances, policy on clothing and provisions
and consumables. The auditor should also know the procedures on the
observance of inventory count.

5. Health Information and Research – When auditing, the auditor should be able to
determine the sources of funds for the purpose assessing the efficacy of a
particular medication.

6. Health Service Delivery – The auditor should know the impact of VAT and EWT
on medical professionals concerning professional fees, room rentals (for clinics)
and segregation or set-up entries in billings and settlements, sale of medicines
both to in-patient administration and out-patient purchases. And for proper
orientation, the auditor should visit the hospital client and observe how each
section operates, and also to observe the procedures.

AUDIT OF HOSPITAL AND HMO ACCOUNTS

According to the overall objectives of audit, the auditor should examine the scope
and responsibilities and the Minutes of the Board or Committees and note
important decision on financial transactions relating to fixed assets, investments
and financial powers. The auditor must obtain a list of books, documents, register
and other records maintained by the Hospital and examine the audit report of the
previous year and should note down qualifications, if any. In addition, the auditor
should also examine the internal control system regarding the purchase of fixed
assets, medicines, stores, consumables, clothing and provisions, etc. Aside from
those, the auditor should also examine the internal control system for recording
of purchases, issue and storage of all items and physical verification of them.
The auditor must also obtain the rate structure for fees, medicine and other
services, power to do concession or waiver of fees. There should be adequate
system for changes and waiver. And the auditor should also be able to calculate
and examine the input-output ratios.
For assets and liabilities, the auditor should examine the following:
 Title documents and other records relating to land and building
 Resolution of Trustees/Managing committee should be verified for
sale and purchase of fixed assets.
 Depreciation should be charged on the basis of the policies of the
company.
 Liabilities should be verified in the usual manner.
 Verify investments
  Stock and stores of medicines, clothing, consumables, etc. should
be physically verified.

For income, the following should be carefully examined by the auditor:

 Bill book, bill register and copy of bills.
 Bills are prepared properly according to visit charges of doctors,
medicine, stay charges, room rent, etc.
 Bills should be verified with the fees/charges structure.
 Bills should be verified with cash receipt book, counterfoil of
receipts and cash book.
 Verification of arrears of bills should be done.
 Unrecoverable arrears should be written off with the approval and
consent of proper authority.
 Concession and waiver on account of fees and other charges
should be verified.
 Rental income should be properly verified. The auditor should
properly vouch property register, arrear of rent, advance rent and
provisions for the same.

Vouching of expenses in hospital is almost the same as in other organization;

however, the following points need to be considered by an Auditor are given
below –
 An Auditor should adopt the usual way to vouch purchases and
other expenses of the hospitals.
 Clear distinction should be made between capital and revenue
expenses.
 Salary of staff should be vouched according to general auditing
principles.

Discuss the accounting and regulatory consideration in conducting an external

audit on Insurance as mentioned and discussed by the resource speaker.
If you have additional accounting, audit and regulatory consideration(s) that were
not mentioned by the speaker, please include it in your discussion.

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Discuss the key audit, tax and other considerations in conducting an external
audit on Banks as mentioned and discussed by the resource speaker.
If you have additional key audit, risk and other considerations that were not
mentioned by the speaker, please include it in your discussion.

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Power and energy sector is considered as a specialized industry because they
are regulated by a unique regulatory body and laws as compared to other
industries. Power and energy industry use the issuances of these regulatory
bodies as the basis for their operation and accounting process. These regulatory
bodies and laws were mentioned in the video. Enumerate those regulatory bodies
and laws, and discuss briefly the effect of those issuances and laws in
accounting and audit of entities in power and energy industry.
If you have additional regulatory bodies and laws that were mentioned by the
speaker, please include it in your discussion.

Below are the different regulatory bodies and laws relative to Power and Energy
Industry in the Philippines. Some were mentioned by the speaker and some were
researched from the internet.

REGULATORY BODIES
1. Energy Regulatory Commission (ERC) – This is a world class and independent
electric power industry regulator that equitably promotes and protects the
interests of consumers and other stakeholders, to enable the delivery of long-
 term benefits that contribute to sustained economic growth and an improved
quality of life.
2. Department of Energy (DOE) – This is the executive department of the Philippine
government responsible for preparing, integrating, manipulating, organizing,
coordinating, supervising and controlling all plans, programs, projects and
activities of the Government relative to energy exploration, development,
utilization, distribution and conservation.
3. National Electrification Administration (NEA) - This is a Philippine government-
owned and controlled corporation (GOCC) attached to the Department of
Energy tasked in the full implementation of the Rural Electrification program
(REP) of the Philippine government and reinforce the technical capability and
financial viability of the 121 rural Electric Cooperatives (ECs).
4. Philippine Competition Commission (PCC) – This is an independent, quasi-
judicial body formed to implement the Philippine Competition Act (Republic Act
No. 10667). The PCC aims to promote and maintain market competition within
the Philippines by regulating anti-competition behavior. The main role of the PCC
is to promote economic efficiency within the Philippine economy, ensuring fair
and healthy market competition.
5. National Grid Corporation of the Philippines (NGCP) -  This is a privately-owned
corporation that was created on January 15, 2009 through RA 9511. It is in
charge of operating, maintaining, and developing the country's state-
owned power grid,[1] controls the supply and demand of power by determining the
power mix through the selection of power plants to put online (i.e., to signal
power plants to produce power, as power plants will only produce power or feed
their power to the transmission grid when directed by NGCP).
6. National Power Corporation (NPC) – This is a Philippine government-owned and
controlled corporation that is mandated to provide electricity to all rural areas of
the Philippines by 2025 (known as "missionary electrification"), to manage water
resources for power generation, and to optimize the use of other power
generating assets.

LAWS
1. Electric Power Industry Reform Act of 2001 (R.A NO. 9136) – This act provides a
framework for the restructuring of the electric power industry, including the
privatization of the assets of NPC, the transition to the desired competitive
structure, and the definition of the responsibilities of the various government
agencies and private entities.
2. Administrative Order 2020-05-0001 – An order providing for a COVID-19
response protocol in the energy sector.
3. Energy Efficiency and Conservation Act (R.A 11285) –This act establishes a
framework for introducing and institutionalizing fundamental policies on energy
and conservation, including promotion of efficient and judicious utilization of
energy, increase in the utilization of energy efficiency and renewable energy
technologies, and the delineation of responsibilities among government agencies
and private entities.
4. Renewable Energy Act of 2008 (R.A 9513) – This act was codified in December
2008 to affirm the government’s commitment to accelerate the utilization of
renewable energy (RE) resources in the country. This is to effectively reduce
harmful emissions and achieve economic development while protecting health
and environment. Incentives and privileges were stipulated for RE development
initiatives. For all the entities involved in RE development, fiscal incentives
include, among others, tax exemption for importation of inputs, components,
parts, and materials and income tax holidays.