Compare accounting practices (for engagement and examination) between a small county hospital and a private, not for profit nursing home under FASB guidance
To compare accounting practices for engagement and examination between a small county hospital and a private, not-for-profit nursing home under Financial Accounting Standards Board (FASB) guidance, we'll explore the key considerations for each entity type.
1. Small County Hospital:
- Engagement: The small county hospital will typically engage in financial statement audits, which involve an external auditor examining the hospital's financial records and assertions. The purpose is to express an opinion on whether the financial statements are presented fairly in accordance with Generally Accepted Accounting Principles (GAAP).
- Examination: The financial examination of a small county hospital will involve the auditor reviewing various components, such as the hospital's revenue cycles, expenses, cash flows, assets, liabilities, and equity. This examination is done through testing the hospital's financial transactions, records, and internal controls to ensure compliance with GAAP.
2. Private, Not-for-profit Nursing Home:
- Engagement: Similar to the small county hospital, private, not-for-profit nursing homes require financial statement audits to express an opinion on whether their financial statements are presented fairly in accordance with GAAP. These audits are essential as nursing homes often receive funds from government agencies, grants, and donations that come with specific reporting requirements.
- Examination: The examiner will review the nursing home's financial records, focusing on revenue recognition, expense allocation, assets, liabilities, and equity. Additionally, they will ensure that any restrictions on funds (such as grants or donations) are properly recorded and reported in the financial statements as per GAAP.
In both cases, under FASB guidance, the accounting practices for engagement and examination would follow the Generally Accepted Auditing Standards (GAAS) prescribed by the American Institute of Certified Public Accountants (AICPA). These standards emphasize independence, professional skepticism, and the use of risk-based approaches to identify potential material misstatements.
It's important to note that while FASB sets the accounting standards, the specific audit procedures and techniques followed will depend on the auditor's professional judgment, the nature of the healthcare entity, and any industry-specific regulations.
To gain a comprehensive understanding of the accounting practices for engagement and examination, it's advisable to consult FASB's official standards, additional authoritative literature, and engage with professional auditors within the healthcare industry.