You are an experienced audit manager at Samway Baker Fitzgerald (SBF), an accounting firm
with offices in Orange, Wagga Wagga, Tamworth, Port Macquarie and Albury in NSW,
Toowoomba in Queensland and Ballarat in Victoria. Although a medium-sized firm by national
standards, SBF includes Australia’s largest regionally-based auditing practice. Most of SBF’s
audit clients are in the manufacturing and service industries. SBF recently acquired a major
new audit client, Dudley Health Limited (DHL), which fully owns:
• St Neville’s, a highly regarded private hospital located in Tamworth
• Acuity Vision, a network of day surgery clinics across NSW and Queensland
• Pellegrino Shores, a retirement village located in Port Macquarie
Its a chilly evening in early July 2019 and you are meeting with your audit senior, Jek Porkins,
to discuss the findings of his preliminary work for the 30 June 2019 audit of DHL.
Fraud at Pellegrino Shores
Last month a senior staff member at Pellegrino Shores was dismissed after it was discovered that she had worked in collusion with a number of residents to reduce their fees and receive
secret payments from them in return. The senior staff member had access to the resident
database. Whilst she was only supposed to update room location changes for residents, she
was able to reduce the resident’s period of stay and the value of other services provided. The
fraud was detected by a fellow employee who overheard the senior staff member discussing
the ‘scam’ with a resident.
St Neville’s patient revenue system
On Sunday 10 March 2019 St Neville’s switched from its ‘homegrown’ patient revenue system
to the DHL ‘off the shelf’ revenue system. The DHL internal audit unit was involved throughout
the switchover. DHL was confident that its revenue system would perform all of the functions
that the St Neville’s patient system had performed. The ‘homegrown’ St Neville’s revenue
system consisted of:
1. Billing system: produces the invoice to charge the patient for services provided such
as accommodation, medications, and medical services. This software includes a
complex formula to calculate the patient bill after allowing for government subsidies,
pensioner benefits and private medical insurance benefits.
2. Patient database: a master file containing personal patient details as well as the
period of stay, services provided and client medical insurance details.
3. Rates database: a master file that shows all accommodation billing rates, rebate
discounts, and government assistance benefits.
Jek Porkins spoke with a number of St Neville’s administration staff about the impact of
switching to the DHL patient revenue system:
• ‘There was some sort of power surge last Friday and we had to re-enter every patient