As per the COSO report, there are five interdependent elements of internal control, including the control environment, control activities, risk assessment, information, and communication, as well as monitoring (Components of Internal Control, 2021). In addition, some of the elements mentioned are related to the financial reporting within the organization, and they are discussed below.
One of the elements which focus on internal control and is also concerned with financial reporting is Control Activities. As per COSO, the control activities are the policies and procedures which aid in ensuring that the management directives are undertaken as well as ensuring that the objectives of the management are attained. Among the actions that are defined within control activities is the authorization of transactions as well as adequate records and documents. These actions are typically tied to the financial reporting process in the organization. For instance, in the authorization of transactions, every financial transaction that occurs ought to be appropriately authorized in a certain way. Authorizations can either be general or specific, contingent upon the needs of the organization. Authorizations are typically crucial within the financial domain because it enables not only accountability but also efficiency. When it pertains to adequate records and documents, this is a significant section that primarily targets the financial systems within the organization as it entails supporting documentation inclusive of invoices, account statements, shipping and receiving forms, and checks. It also deals with schedules and scrutiny of financial information inclusive of account balances, reconciliations, etc. Finally, it also deals with ledgers, trial balances, and financial statements and is thus an internal control measure specifically directed towards the organization’s financial reporting processes.
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The other element is information and communication. This element is connected explicitly to financial reporting within the organization because it entails the management’s access to feedback information and reports. The feedback information typically comprises financial and operation information, which is chiefly generated from the accounting systems. In addition, the accounting systems are expected to be highly accurate in regards to the identification of relevant financial events of the organization and record processes and data associated with it. Consequently, this element of internal control deals with the financial reporting within the operation especially considering it entails the crucial process of communicating them effectively.
The third internal control element which deals with financial reporting is monitoring. This element deals with the monitoring of accounting systems within the organization, including internal and external audits. Therefore, monitoring has a financial aspect to it is a crucial element of accurate and effective financial reporting. Monitoring is a process of ensuring that all the processes within the organization (inclusive of the financial process) are running smoothly and as expected.
Designing an AIS Method in Healthcare to Improve Efficiency of Operations
While designing the accounting information system for healthcare, it is crucial to understand that healthcare accounting is complex and different from other industries. This is because hospitals ought to navigate intricate payers’ systems in the United States, including private insurers and government programs like Medicare and Medicaid (What You Need to Know about Healthcare Accounting Practices, 2021). The proposed AIS will utilize the accrual cash accounting method, which typically recognizes expenses and revenues when they are incurred or earned, regardless of when the provider gets paid. For instance, this particular method of accounting operations works in such a way that when patients are billed for a particular service, the associated revenues and expenses are recorded at that particular point. The primary advantage of this methodology is the accuracy of data as it provides information on what is occurring amid a given quarter. The proposed AIS will have the complexity to handle functions including accounts receivable and payable.
The proposed AIS will also have the ability to recognize revenues from different payers. It categorizes the payments from each source and does the individual balancing of accounts to ensure that monitoring can be done for each source of revenue. The proposed AIS will also include elements of artificial intelligence whereby automated calculations of depreciated infrastructure, equipment, and commercial buildings owned by the healthcare organizations are done. The neural networks will be able to determine the depreciations accurately, and thus the asset’s depreciation will be recorded across the accounting periods.
To ensure an efficient account monitoring process, fraud detection systems will be deployed within the accounting information systems such that certain flags would lead to direct alerts to chief financial officers as well as managers that are concerned with the finances of the organization and this process also helps in detecting mistakes done within the accounting process, and decreases the times needed for approval and authorizations of transactions, thus significantly increasing efficiency. Automated generation of reports would be enabled as well. In this manner, the means by which the proposed AIS system increases the efficiency of operations is via the automation of some of the tasks that are crucial to the accounting process.
Designing an AIS Method in Healthcare to Improve Communications
The chosen organization within this section is UCLA Medical Center in Los Angeles. To utilize AIS in order to improve communication, a method that entails the integration of healthcare and financial information will be proposed. This approach entails the partial integration of ERP systems administrative and financial modules to a myriad of specific applications like the lab, radiology, etc. Therefore, this means that electronic clinical histories of patients will be obtained for each patient as information is captured in real-time and can be accessed anywhere. This improves the communication between the hospital staff. Information can be sent anywhere in real-time while still undertaking accurate accounting of finances associated with each activity. In this particular methodology, each activity is associated with a financial transaction, and thus the accounting and financial processes are recorded in the background. Unlike complete integration, there is no significant re-engineering of processes; thus, the hospital staff works normally as it does not entail a modification in their working methodology as the accounting processes happen in the background as they digitally record the services and associated payments (Escobar-Perez et al., 2015). This integrated system improves the usefulness of both accounting and patient information as it makes it more accessible, reliable, and timely. Thus, it not only improves accounting but also communication at UCLA Los Angeles.
Recommendation Letter
John Banks
5151 Wilkinson Court
Bel Air, LA 51486
29 th April 2021
The CEO
UCLA Medical Center
Los Angeles, CA 90095, USA
W4 4LJ
Dear Sir,
I am composing this letter to recommend the installation of an accounting information system in the organization.
An Accounting Information System alludes to a formal process for collecting, processing, and distributing financial and accounting data to users within the organization.
As per the research findings, accounting information systems lead to significant improvements in accounting efficiencies by automating some of the accounting processes. When integrated with ERP and HER systems, they can enable efficient cooperation and communication within the organization and significantly improve financial accounting.
Therefore, the recommendations are that the company ought to implement and adopt the accounting information systems to significantly improve the collection, storage, processing, and reporting of financial data and improve communications between the associated departments and users within the organization. In this manner, the company should invest the necessary software and hardware components required to implement such systems inclusive of capable computers and servers for running such operations.
The benefits of implementing accounting information systems within UCLA are momentous. One of the significant benefits is the efficiency associated with a computerized financial information system. They are typically faster and more accurate in collecting, storing, processing, and sharing financial information in contrast to conventional methods. They are also cost-effective as they eliminate the need for several accountants since they automate some of the processes which would otherwise have been done manually.
With these in mind, I believe the implementation of an accounting information system within the organization would go a long way in increasing accuracy and efficiency in the accounting process and improving communication and sharing of information.
More information will be available upon request, and we can set up a meeting if you want to delve into the details of how we can implement such a system in our organization. Looking forward to hearing from you soon.
Yours Sincerely
John Banks
Accountant
References
Components of Internal Control. (2021). Retrieved 29th April 2021, from https://www.purchase.edu/offices/internal-control/components-of-internal-control/
Escobar-Pérez, B., Escobar-Rodríguez, T., & Bartual-Sopena, L. (2016). Integration of healthcare and financial information: Evaluation in a public hospital using a comprehensive approach. Health informatics journal , 22 (4), 878-896.
What You Need to Know about Healthcare Accounting Practices. (2021). Retrieved 29th April 2021, from https://healthcaremba.gwu.edu/blog/what-you-need-to-know-about-healthcare-accounting-practices/
