Accounting and Audit Enforcement

Document Type:Essay

Subject Area:Accounting

Document 1

The health facility operates the centres through partnerships, subsidiaries, joint ventures (that includes USIP Holding Co and USPI joint venture). At the same time, the company has a lower level facility; Conifer Holdings, Inc that specializes in business healthcare service in places such as physician revenue, value-based services, individual hospitals and health plan facilities among others. According to Archer (2016), by the end of 2017, the health facility had 76 hospitals that included children’s wing, two dedicated hospitals, and one specialty access facility. All the subsidiaries are owned by the main hospital, while 13 are leased and jointly owned by the group’s third parties. Its main services include cardiothoracic, coronary care, physical therapy, cardiothoracic services, critical care, liver, bone marrow transplants, oncology and many other health-based services. Over the years, the company has posted health performance in terms of profit realization and expansion of its services. Tenet remains a formidable hospital facility with reputable services all over the United States. Fraud Case In 2007, April 2, the Securities and Exchange Commission filed a fraud case against the hospital facility. Alongside the hospital, the then Chief Financial Officer, Co-President, co-president, Chief Operating Officer, Chief Compliance Officer, former General Counsel, and Chief Accounting Officer were charged too (Archer, 2016). According to the Securities and Exchange Commission, the hospital facility failed to divulge the strong earnings and financial growth for the period 1999 up until 2002. According to the Securities and Exchange Commission, the facilities profits and growth was majorly compelled by the hospital's exploitation of a gap in the Medicare reimbursement structure.

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At the time the hospital revealed is the strategic move that it was not sustainable, its stock dropped to a low of $11 billion (Archer, 2016). At the time, the hospital facility was located in Santa Barbara, Calif and stood out as the largest traded public company in the United States (Hall, Orentlicher, Bobinski, Bagley & Cohen, 2018). Tenet agreed to settle the issue and paid a penalty of $10 million, an amount that SEC placed in a Fair Fund meant for distribution especially to the investors who were harmed in accordance with Sarbanes-Oxley Act. Tenet never denied the allegations and permanently enjoined the case in the antifraud reporting in addition to bookkeeping in accordance with the Federal Securities regulations. According to the Psek et al. the corporation engaged in an unsustainable scheme to achieve higher earnings in which it operated a deliberate exploitation of the Medicare reimbursement system.

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The organization's scheme entails a gap in the system that related with the “outlier payments” that are put together to compensate other health facilities for taking care of extraordinary patients (Archer, 2016). The management of Tenet facility came to the realization that it could increase its revenue from the outlier pay-outs by way of amassing the gross charges put forth by the hospitals. Between the year 1999 to 2002, the facilities revenue grow three-fold and its earnings achievements were surpassed each cumulative year. The Commission strives to encourage and uphold an environment worthy of public trust. Over the years, the commission has endeared in its operation with various strategies to ensuring that organizations, businesses, companies, and enterprises adhere to the laid down recommendations and regulations by the commission (Archer, 2016). The Commission has further put in place measures and strategies that help maintain a commendable business environment.

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Some of its guidelines, regulations, and commendations for profit and not for profit health care facilities have gone a long way in establishing an ethical business environment protecting investors and laying down a strong foundation of public trust (Psek, 2015). Some of these regulations applying to these organizations include rules of practice, regulations governing financial reporting, crowdfunding of offerings that are over $1 million, debt collection, and informal procedures. Auditors are often expected to report to audit committees for proper investigations and analysis of an organization's financial performance. According Maul et al. the Commission has been successful in following up on its mandate by undertaking an in-depth investigation of a non-profit organization by way of audit approval, enhanced communication between the management and the audit office. Through and by the latest on-goings in fraud cases and corporations adhering to the SOX act, it is evident that the Commission has been successful in reducing fraud cases and improve on corporate governance.

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According to Archer (2016), many organizations such as not for profit health organizations have improved on their financial openness in addition to meeting the set ethical standards expected of them in terms of revealing their financial performance to the public and investors. Recommendations In the above case of Tenet, SOX can effectively provide for regulatory provisions that enjoin a company’s financial performance with any activities that go against the provided regulations. Since most organizations such as Tenet take advantage of weaknesses within the regulations, the best prevention mechanism is to have a mandatory provision to establish strong internal control mechanisms linked to the commission's audit office giving it an upper hand in detecting any dishonest activity. The commission has to take a pro-active approach to enact strong internal provisions within each organization's financial management system.

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As such, the Commission would find it easy and non-tasking to review a corporation’s financial activity in real time. The strategy would go a long way in reducing the time needed for the undercover investigation, reporting, and whistle-blowers who many a time may find it difficult to report a mischievous financial scam or dishonesty. Bobinski, M. A. Bagley, N. Cohen, I. G.  Am. Crim. L. Rev. Psek, W. Operationalizing the learning health care system in an integrated delivery system.  Egems, 3(1).

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