Key Audit Matters of the Aged Care Industry of Australia
The financial reporting for aged care providers is governed by various regulations. The new regulation requires that the aged care providers submit their financial reports by 31 October of the following financial year in form of two reports. The two reports are designed to ensure consolidation and flexibility to the care providers. The two reports comprises of the audited General Purpose Financial Report (GPFR) and an unaudited Aged Care Financial Report (ACFR). This increases the responsibility of the auditors to review the financial reporting of the aged care providers with due care.
The key audit matters are the matters that are significantly important for the audit of the financial report of an organisation and can affect the audit report of the auditor. For the aged health care industry the two key audit matters according to Australian Audit national office (ANAO, 2018) are as follows:
- KAM – Accuracy of payments of personal benefits and subsidies: The aged care subsidies payments to the care providers are based upon the Aged Care Funding Instruments which are provided by the care providers. This involves lots of judgement by care providers about the level of care required for an aged person. The care providers in this situation are inclined to over asses the care needed in order to obtain the greater amount of subsidies. The auditor needs to evaluate the process followed by the care providers in assessing the level of care required. The auditor needs to ensure the system for assessing the health care level is well defined and is used consistently in every case. Thus the auditor needs to gain confidence though the audit procedures that the Government healthcare subsidies are gained by the care providers to increase their income but are the result of actual care needed by the aged. The auditor can challenge the process followed to assess the health care assessment made by the care providers and can seek expert advice to ensure the process followed is proper.
- KAM – Completeness and accuracy of Pharmaceutical Benefits Scheme recoveries: The pharmaceutical benefits scheme allows the care providers to recover the drug revenue. The estimation of the amount requires judgement on the basis of the data that is procured form the Department of human services and is complex. The auditor needs to review the process followed and the consistency of the use of the process in the organisation. It is possible that the cost of medicines and vaccination recovered under the PBS is not listed for the underlying health issue and is considered by the care provider to increase the cost recovery. Thus the auditor needs to ensure that the medicines and vaccination are listed in the PBS. The auditor can refer to the latest listing by the Pharmaceutical Benefits Advisory Committee (PBAC) and should look into the delisting. Though the government is working towards enhancing the transparency and effectiveness in the PBS listing process, it is subject to misrepresentation which can be accidental or intentional (PBS, 2018).
However it cannot be denied that the assessment of health care required by an aged person is dependent upon the individual evaluating the condition and is subject to personal judgement. The auditor has to ensure the process followed can be accepted generally and covers all dequired areas.