Finance & Ethics

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Financial Reporting Practices & Ethical Standards in Health Care Finance

Financial Reporting Practices & Ethical Standards in Health Care Finance


Addressing financial reporting practices and ethical standards in health care finance can be done in various different ways. Either way this component of health care is addressed, it is important for a health care finance element, within an organization, to ensure that this is addressed correctly. A good way to explain and address the ethical standards in health care finance is by explaining the four elements of finance. These four elements include Planning, Controlling, Organizing, and Decision Making. With these four elements, addressing financial reporting practices and ethical standards in health care organizations, can be addressed, and provide examples that reflect how organizations accomplish this. This paper addresses financial management of health care organizations and integrates research articles. I will address financial reporting, ethical standards, and four elements of financial management. Moreover general accepting accounting principles and ethical standards will be discussed.

Financial Reporting

In health care organizations, financial reporting involves financial statements. There are four main financial statements. They are: (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders' equity (U.S. Exchange Commission, 2011). The third part of a cash flow statement shows the cash flow from all financing activities. It is very important for a organization to report their finances, since financial reporting will provide investors with information about the organization's management. Financial reporting also provides information for all of management of their earnings and cash flow in which one can use future forecasting. (Clarke, 2005)

Ethical Standards

The Sarbanes Oxley-Act is often used for ethical situations and issues; however the Sarbanes Oxley-Act does not apply for nonprofit organizations. It is critical that all organizations use the Sarbanes Oxley-Act as the standard for good business practice and implement those sections that are within the capability of the organizations (Clarke 2005). All employees I believe use good work ethics and standards in their organization and line of work and the ethical standards result in good reputation and standing of the organization. (Ethics in Financial Reporting, Record, 2003) The actuary bears a significant responsibility in assuring that the methods, assumptions and processes used to determine certain financial statement balances adhere to regulatory and professional requirements.

Four Elements of Financial Management

The four elements of financial management are; (1) planning, (2) controlling,

(3) Organizing and directing, and (4) decision making.

Planning consist of the finance manager identifying and knowing the organizations objectives and planning the steps to accomplish the objectives. A good example of this is, within a healthcare organization financial managers need to choose among numerous methods of depreciating assets. Different methods result in a different financial picture. Judgment is then required to determine the asset's useful life or residual value. A financial manager knows what the asset cost, but what it will be worth five years from now is a judgment call. To ensure consistency of practices organization wide, accounting policies and procedures should be developed and ...
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