Tip #12 • “My CPA will find fraud or embezzlement at Year End”
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This blog was last updated in 2019.
An alarming number of dentists have confidence that their “year-end” statement preparation will detect employee fraud.
This confidence is overstated as many common dental office frauds will bypass the accountant’s radar screen.
Most accountants prepare “review” or “compilation” services at year end for the dentist.
A “review” engagement is usually requested by a lender (bank) and focuses on reviewing and verifying the practice’s financial statements. (this is to protect the bank’s interest in the dental practice) The review will not detect dental office frauds such as third party insurance fraud, upcoding, identity theft, credit card abuse or data breaches. In most cases, the review will not review your dental claims history and patient charts (this is where fraud often occurs.)
The “compilation” engagement is the most common year end reporting package performed for dentists. It relies on information supplied by the dentist which includes summary information taken from the front desk computer system. (i.e.: total annual billings, total collections and accounts receivable) If the dental software was used to commit fraud, it is unlikely the accountant will discover it. Detecting dental software perpetrated fraud requires a computer specialist with intimate knowledge of dentistry, claims submissions, treatment phases and dental plan (benefits).
Of course your accountant will look for deceptions that may cause material misstatements in your practice’s financial statements. They do this by examining your financial reporting process for inappropriate or unauthorized journal entries throughout the year. They also look for adjustments to amounts reported in the financial statements that are not reflected in formal journal
entries, such as through consolidating adjustments and reclassifications.
Even at the highest level of year-end financial statement preparation (the “audit”) many employee and patient frauds will not be detected. This is because accountants will review your financial systems for material misstatement and not audit your clinical systems. (charts and dental claims)
