The hospital brought suit against its former “Big Four” accounting firm for failing to conduct its examination of the hospital’s financial statements for three consecutive years in accordance with Generally Accepted Auditing Standards (GAAS).
Issues
- Valuation of patient accounts receivable had to be determined
- Accounting treatment and financial statement disclosure of a material subsequent event
- Required communications to the hospital’s board of directors by its independent accountants
Approach
- HMP reviewed the accounting firm’s work papers for the years in question
- Interviewed members of hospital management
- Reviewed selected work papers and analysis prepared by the hospital’s successor auditors
- Prepared an expert report, which hospital counsel elected to voluntarily provide to the accounting firm’s legal counsel
Results
- After reviewing HMP’s report, the accounting firm requested non-binding mediation, at which a negotiated settlement was promptly reached