As the risk management responsibilities of audit committees expand, many organizations have discovered they lack the level of knowledge required to establish effective risk mitigation policies and guidelines.

Expanded responsibilities
Although CEOs and senior management are responsible for assessing, managing, and implementing successful enterprise risk management programs, audit committees play a critical role in the process. It’s up to them to set the tone at the top, so they need to understand how the evolving standards, regulations, and increased scrutiny will impact their organization:

• The trickle down effect of the Sarbanes-Oxley Act including:
  • More stringent financial reporting
  • Audit risk assessment standards, which require developing or enhancing internal control (SAS Nos. 104-111)
• Regulatory changes and the intensity of the OIG Work Plan
• Legislative changes enacted by the IRS, focused specifically on tax-exempt organizations, including the redesigned Form 990
• Increased risk of negative publicity if accused of malpractice

Consequences
Poorly functioning risk management programs can have catastrophic consequences:

• Fines and penalties due to noncompliance
• Fraudulent financial reporting or embezzlement due to dysfunctional internal control
• Intermediate sanctions or loss of tax-exempt status from the IRS
• Damaged reputation and loss of market share due to negative publicity
• Malpractice claims
• Restated financial statements, resulting in loss of access to capital due to downgraded financial ratings
• Bankruptcy, destroyed careers, and civil and criminal penalties

Improve governance through training
If you are interested in improving your health care audit committee’s enterprise risk management practices, view two presentations given by LarsonAllen at the Health Care Compliance Association’s Audit & Compliance Committee Conference, held February 11-13, 2008 in Scottsdale, Arizona:

Introduction to Health Care Accounting Download
LarsonAllen speaker: Matt Claeys

Risk Assessment & Internal Control Download
LarsonAllen speaker: Kelly Nueske