(b) Akunka hospital is located in a country where healthcare is free, as the taxpayers funds are used to finance state owned hospitals. Two years ago, management reviewed all aspects of the hospital’s operations and instigated a number of measures aimed at improving overall “value for money” for the local community. Management have asked you, an audit manager in the hospital’s internal audit function, to perform a review over the measures which have been implemented.
Akunka has one centralized procurement department through which all purchase requisition forms are forwarded to. Upon receipt, the procurement team embarks on market research for the lowest price from suppliers after which a purchase order is raised. The purchased order is then submitted to the procurement director, who authorises all orders. The small procurement team receive in excess of 200 forms a day. The human resource department has had difficulties with recruiting suitably trained staff. Overtime rates have been increased to incentivise permanent staff to fill staffing gaps, this has been popular, and reliance on expensive temporary staff has been reduced. Monitoring of staff hours had been difficult but the hospital has implemented time card clocking in and out procedures and these hours are used for overtime payments as well.
The hospital has invested heavily in new surgical equipment, which although very expensive, has meant that more operations could be performed to ensure faster patient recovery. However, there is shortage of well-trained medical staff. A capital expenditure committee has been established, made up of senior managers, and they plan and authorise significant capital expenditure items.
Required:
(i) Identify and explain FOUR strengths within Akunka’s operating environment; and
(ii) For each strength identified, describe how Akunka might make further improvements to provide best value for money.
(c) Describe TWO substantive procedures the external auditor of Akunka should adopt to verify EACH of the following assertion in relation to an entity’s property, plant and equipment:
(i) Valuation;
(ii) Completeness; and
(iii) Rights and obligations.
(Note: Assume that the hospital adopts International Financial Reporting Standards).
