1. EVOLVING FROM THE FLINSTONES OF TRADITIONAL AUDITING TO THE JETSONS OF CONTINUOUS AUDITING
Kristin Freitas
Senior Auditor Analytics Specialist
John Lefter
Director of Internal Audit
Sharp HealthCare

2. Introductions Kristin Freitas John Lefter
Kristin began her career with KPMG, LLP, where she worked for three years. She holds a BS in Accounting from the University of Southern California. Kristin has worked for Sharp HealthCare for over 11 years. She splits time between Internal Audit and Corporate Compliance. She set up the continuous auditing program at Sharp HealthCare using ACL and continues to grow the program.
John Lefter
John began his career with Ernst & Young, LLP where he served for over five years in a multitude of industries such as biotech, pharmaceuticals, defense, semiconductors, software and retail. After leaving public accounting, John held Internal Audit management positions with public companies in the defense and healthcare industries. John currently is the Director of Internal Audit Services at Sharp HealthCare. Throughout his career, John was involved with on-going continuous auditing projects as well as with implementing ACL solutions for ad-hoc and continuous monitoring efforts. He received a BS in Finance from San Diego State University and holds a MS in Accounting from University of Notre Dame.

3. About Sharp HealthCare
Integrated, not-for-profit healthcare system in San Diego County, with $3.5 billion in annual revenue in 2016
4 acute care hospitals, 3 specialty hospitals, 3 affiliated medical groups and a full spectrum of other facilities and services
18,000+ employees, 2,900+ physicians
Awarded Ethisphere’s World’s Most Ethical Companies four of the past five years
Rated No. 16 overall by Forbes Best Employers in 2016

4. Objectives The Jetsons Meet the Flinstones
Evaluate the benefits of implementing continuous auditing within your own organization.
Discuss best practices and lessons learned from the use of analytics software in continuous auditing projects.
Demonstrate the possible benefits and value that continuous auditing can add to an organization.

5. Agenda Data Analysis Continuous Auditing Implementation
The Link Between Data Analysis and Continuous Auditing
Putting It In Practice
Continuous Auditing

6. Data Analysis Two Types of Data Analysis
Ad hoc Data
Analysis
Continuous Auditing
“Always on” – scripted auditing and monitoring of key processes.
Seeking timely notifications of trends, patterns and exceptions.
Supporting risk assessment and enabling audit efficiency.
Continual execution of automated audit tests to identify errors, anomalies, patterns and exceptions as they occur.
Explorative and investigative in nature.
Seeking documented conclusions and recommendations.
Specific analytic queries – performed at a point in time – for the purpose of generating audit report findings.
Seeking to improve the efficiency, consistency, and quality of audits.
Data Analysis Benefits
Combine data from different sources.
High-level view of data trends with the ability to drill down into the data
Reduce project time and improve productivity
Decrease reliance on IT personnel
Higher degree of confidence in the accuracy and completeness of coverage
May identify errors, which may lead to the discovery of fraudulent activity
Continuous Auditing
A technology-driven method used to perform automated data analysis for control and risk assessments on an ongoing basis.
Covers 100% of selected transactions
Detects data anomalies, control gaps and weaknesses in a real-time environment
The Link Between Data Analysis and Continuous Auditing
Effective use of data analysis technology is a precursor for continuous auditing
Competency:
Understanding key business processes
Ability to analyze and interpret the data
Increased levels of data analysis sophistication

7. Continuous Auditing Implementation
Steps:
Identification of criteria/data elements (Relevant department and IA)
Script Development within ACL (or other tool) (IA)
Testing and Refining (IA, Department)
User Acceptance (Department)
Go-live (IA)
Putting it in Practice
Current Continuous Audit Projects
Accounts Payable
Payroll
Employee Expense Reimbursement
Purchase Orders
Charge Capture

8. Accounts Payable Continuous Auditing Potential Risks/Critical Exposures
Conflict of Interest – Employees also paid as a vendor
Vendor Set-up – Fictitious vendors; inactive vendors still active
Duplicates – Vendors that have been paid twice for same product or service
Discounts Missed – Invoices are not paid in a timely manner to achieve discount, when applicable
Segregation of Duties – Vendors created and only used by a single A/P clerk
Active Vendors Missing Tax ID Numbers
Payments Made to Active Vendors Over 60 Days After Invoice Date
Multiple Vendor Address Changes
Approval Limits
Duplicate Vendor Addresses on Active Vendors
Payments Not Made in Time for Discounts
Duplicate Invoice by Vendor, Invoice, and Invoice Date with Different Companies
Vendors Used and Created by a Single AP Employee
Active Vendors with No Payments for Two Years
Duplicate Invoices by Similar Invoice Number and Amount
Sequential Invoice Numbers by Vendor
Vendors Reactivated
Vendor Master Addresses Matching Employee Addresses
Duplicate Invoice by Vendor, Amount, and Invoice Date
Vendor Address Mail Drop/PO Box Match
Vendor Yearly Trend
Combine with slide 13

9. Payroll Continuous Auditing
Potential Risks/Critical Exposures
Payments made to terminated or ghost employees
Unauthorized user pay rate adjustments
Duplicate payments
Required deductions are not withheld
Terminations – Payments made in prior period after employee termination date
Pay Rate Changes – Pay rate changes made during the period by a user not on the Safelist
Biweekly Duplicate Checks – Duplicate payroll checks on employee number, gross pay, and pay period end date
Deductions – Checks where gross pay > 0 and gross pay = net pay
Daily Check Runs Duplicate Checks – Duplicate checks from daily check runs

10. Employee Expense Reimbursement Continuous Auditing
Potential Risks/Critical Exposures
Non-compliance with expense reimbursement polic
Restricted Keywords
Duplicates on Employee, Amount, Expense Date
Split Expenses
Employee Trends
Parking > $125
One-way Mileage > $250

11. Purchase Orders Continuous Auditing
Potential Risks/Critical Exposures
Unauthorized or excessive expenditures
Payment for services not rendered
Non-compliance with authorization policy
User creating and receiving for the PO are the same.
Users creating PO’s over $100K
PO’s with PO date after Invoice date
Split PO’s
Combine with slide 17.

12. Charge Capture Continuous Auditing
Potential Risks/Critical Exposures
Accuracy of patient charges
Missed revenue for patient charges not entered timely
Reimbursement denials for procedure codes assigned by HIM department and do not match the patient charges

13. Charge Capture Continuous Auditing Audit Routines
Labor & Delivery
NICU
Triage
Implants
Interventional Radiology
Timeliness of Charge Entry (Post Date – Service Date)
Duplicate Charges
Procedure Code Charge Code Match
Missing Newborn Hearing Charges
Multiple Level Charges
Co-dependent Charges
Pharmacy Co-dependent Charges
Charges on Account where Patient Age > 0
Missing Triage Level Charges
Charges on Account where Patient Age = 0
Missing Supply Charges
Missing CT Charges
Zero Dollar Charges
Missing US Charges

14. Putting It In Practice Dollars Found or Expenses Avoided – FY17
Yabba-Dabba-Doo
$1,884,713

15. Questions?
Thank You