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Fellowes and Associates is a successful mid-tier accounting firm with a large range of clients across Canada. During the 2020 financial year, Fellowes and Associates

Fellowes and Associates is a successful mid-tier accounting firm with a large range of clients across Canada. During the 2020 financial year, Fellowes and Associates gained a new client, Health Care Holdings

Group (HCHG), which owns 100 percent of the following entities:

Shady Oaks Centre, a private treatment facility
Gardens Nursing Home Ltd., a private nursing home
Total Laser Care Limited (TLCL), a private clinic that specializes in laser treatment of skin defects



Year end for all HCHG entities is June 30.

On April 1, 2020, Gardens Nursing Home Ltd. switched from its homegrown patient revenue system to HCHGs equivalent system. HCHG is confident that its off -the-shelf enterprise system would perform all of the functions that Gardens Nursing Homes homegrown system performed.

Gardens Nursing Homes homegrown patient revenue system comprised the following:

1. Billing systema system that produced the invoice to charge the patient for services provided, such as accommodation, medications, and medical services. This software included a complex formula to calculate the patient bill allowing for government subsidies, pensioner benefits, and private medical insurance company benefit plans.
2. Patient databasea master file that contained personal details about the patient as well as the period of stay, services provided, and the patients medical insurance details.
3. Rates databasea master file that showed all accommodation billing rates, rebate discounts, and government assistance benefits.



At the request of the board, the groups internal audit unit was involved throughout the entire conversion process. The objective of its engagement, as the board stated, was to make sure that the conversion worked without any problems.

As part of the planning arrangement for the 2020 financial statement audit, the audit partner, Tania Fellowes, asked her team to speak with a number of Gardens Nursing Home staff about the impact of the switching to the HCHG patient revenue system. Below is an extract of the staff s comments:

There were some occasions where we invoiced people who were past patients. This seems to have happened when they shared the same surname as a current patient.
We seem to have some patient fee invoices where, for no reason, we have billed patients at a lower room rate than what we have on the rates database.
Lately weve had an unusually high number of complaints from recently discharged patients that the fee invoice we sent them does not line up with the agreed-upon medical fund and government subsidy rates. We then found out that halfway through last month someone from the IT team made a software change to fix a bug in the billing calculation formula.
There was some sort of power surge last Friday, and we had to re-enter every patient invoice that we had processed in the last two weeks.



Identify the audit risks associated with the installation of the new IT system for patient revenue for Gardens Nursing Home.

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