Fraud Detection and Prevention in Healthy Hospital

This paper discusses the use of information technology in making the counterfeit in the organization by the dishonest employees. Read about the factors responsible for fraud, proper conduction of internal audit, major information governance considerations, online information auditing plan, and handling ethical dilemma in Healthy Hospital.

Running head: HEALTHY HOSPITAL
HEALTHY HOSPITAL
Name of the Student:
Name of the University:
Author Note:

1
HEALTHY HOSPITAL
Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
The factors those are responsible for the fraud:...........................................................................2
Proper conduction of the internal audit:......................................................................................3
Major information governance considerations:...........................................................................4
Online information auditing plan for the Healthy Hospital:........................................................4
Areas to be concerned in online auditing system:.......................................................................5
Handling the ethical dilemma:.....................................................................................................5
Conclusion.......................................................................................................................................6
Bibliography....................................................................................................................................8

2
HEALTHY HOSPITAL
Introduction
The paper discusses about the use of information technology in making the counterfeit in
the organization by the dishonest employees. The case study on which the analysis of this paper
is based is about the Healthy Hospital (DeZoort and Harrison 2018). The case study is regarding
the fraud in the accounting system which was committed by the temporary clerk. The different
aspects those can be derived and evaluated form the case study will help to understand the nature
of the frauds and the significance of the information technology in making the fraud.
Discussion
The factors those are responsible for the fraud:
There are different factors those can be responsible directly and indirectly for this fraud.
The factors can be considered from the different aspects.
Organizational aspects:
Healthy Hospital is a renowned hospital at San Francisco. However, due to the increased
competition and other expenses, the overhead cost of the hospital was needed to be reduced. In
order to do this the management of the hospital downsize the number of permanent clerks, which
was not approved by some of the members of the organization. After sometimes, the
mismanagement of payment was notices and the temporary clerk was appointed who was the son
of one of the employees in the hospital. This indicates the mismanagement of the governing body
of the hospital along with violation of the anti-nepotism rule of the hospital administration. The
decision was taken immediately without considering the consequences of the action. The
decision of the management of the organization is not proper in this case.
Technical aspects:

3
HEALTHY HOSPITAL
The systems used for keeping the track of the account are of 1990’s. The systems were
gone through the update and reengineering. However, these do not make the systems used for
keeping the track of the hospital management system reliable. With the advancement of the
technology various software are available which are capable of smart data and financial
information management. Apart from that the hospital muses oracle for storage and maintain the
database which was effective solution for earlier days. At present the large amount of the
complex data and keeping the right track of them may not be manageable using only Oracle. It
can be said that there is a lack of technical upgradation in the system which has helped that
temporary clerk to do the fraud easily.
People:
The members from the management of the organization are equally responsible for the
consequences. The A/P manager Tracy Downs has appointed the Matt Jones without proper
interview and without considering other candidates for the interview. The appointment process
was not proper and violation of the rule. Apart from that Background check for Matt did not
happened in this case. The total process indicates the lack of proper governance which was not
expected from the management of the hospital.
Proper conduction of the internal audit:
It has been seen that the temporary clerk was given responsibility of disbursement of the
cash in semiweekly manner. The responsibility was given unofficially as the supervisor was
away from work for some time (Drogalas et al.2017). The decision was not acceptable as the
responsibility was crucial for the organization and giving the responsibility to the temporary
employees regarding this is not justified. Apart from that it has been seen that Matt has used his

4
HEALTHY HOSPITAL
own vendor account for committing the fraud. In this case, there was not monitoring on his
vendor account apart from that the proper follow ups were not taken,
In this case, there was lack of monitoring in the audit process. The internal audit process
is needed to be monitored by CFO and the higher authority. The distribution of the work and
responsibility were needed to be given to the proper employee (Mansor 2015). Giving the access
of the system should be assigned to the authorized and permanent employee of the organization.
In this case, it is needed to be maintained that Matt has the access of the main safe where pre
assigned cheques were store. This access also helped him in the fraud.
Major information governance considerations:
The systems used for the managing of the information and the accounting system in the
hospital are of the systems form 1990’s AS/400 and TANDEM hardware and client/server
technology are used for the managing of the information and accounting system. These system
has undergone through several update and reengineering (Johansson and Carey 2016). The
information system manages the number of cheques and the data regarding the vendor and the
suppliers for the hospital. Apart from that the system is also used for keeping track of the
monitory resources and assigning of cheques to the vendors (Raiborn et al. 2017). Oracle
database is used for the storage of the information. In 2008 the business process of the hospital
has undergone through business process reengineering. Several decision regarding the
downsizing and increasing the efficiency and the flexibility of the whole system were considered
in this process (Kummer, Singh and Best 2015). Fifteen working groups were formed for the
different business processes. The employees were given proper training for the adopting of the
new system.

5
HEALTHY HOSPITAL
Online information auditing plan for the Healthy Hospital:
The existing auditing plan for the hospital is heavily dependent on the manual process.
Though the data storage is done through the use of the application software (McMahon et al.
2016). However, there is a chance for the human error and the occurrence of the fraud. It has
been seen that the audit system was manipulated by one of the clerk of the hospital. In order to
get the secured system, the adoption of the online auditing can be done.
Areas to be concerned in online auditing system:
In online audit, some of the areas are needed to be concerned. All the vendor accounts are
needed to be monitored by a main monitoring system. The vendor account are needed to be
connected and synchronized (Othman et al. 2015). The client server model can be adopted in this
case. The calculations of the payment and the analysis of the expenses can be done by the
automated machine and the bills can be auto generated or computer generated. This will mitigate
the chances of the human error and the possibility of the fraud. The main handling and the
monitoring system is needed accessed by the authorized person only.
The emphasis is given on the areas which will help to mitigate the fraud in the system
and mismanagement of the generation of the payment to the vendors (Donelson, Ege and
McInnis 2016). Apart from that it is expected that the use of the system generated process will be
helpful to bring the flexibility in the system.
Handling the ethical dilemma:
There are some ethical issues regarding this case study. The ethical problems related to
this case have different dimension and can be evaluated from the different perspective. The first
ethical concern comes from the organizational side (Petraşcu and Tieanu 2014). The members of
the organization considered a candidate for the post of the clerk who is the son of the existing

6
HEALTHY HOSPITAL
employee of the hospital. The management did not even considered other candidates for the post.
This move is not ethical as it violates the fair rule of appointment. The major ethical issue
happens when the fraud is committed by the newly appointed clerk (Asare, Wright and
Zimbelman 2015). The clerk confessed about the crime and as the reason stated that he has
serious health issues and has no money for the treatment. However, the doing of the clerk cannot
be considered ethical as the clerk has used the valuable resource of the company for the personal
use.
It can be said both the management and the newly appointed clerk have not maintained
ethics in the working situation.
In order to mitigate the ethical dilemma in this case, some of the things are needed to be
considered. The rules regarding the anti-nepotism during the recruitment of the hospital are
needed to be followed during the appointment (Huang et al. 2017). This will bring the clarity in
the appointment process. Moreover, the background check of the employee is needed to be done
before offering him or her the job. From the side of the employee, they should maintain the rules
and the regulations of the hospital administration. They should be made aware about the
consequences of unethical practices in the office work.
Conclusion
It can be concluded from the above discussion that the evaluation of the case study has
been performed from the different aspects. The gap in the organizational process has been
identified in this course. It can be said that there was the lack of governance form the side of the
management during the recruitment process. Apart from that there are certain changes those are
needed to be made like technical update of the system in order to make the whole process more

7
HEALTHY HOSPITAL
flexible. There are some of the ethical issues identified in the process. The mitigation of the
ethical dilemma can be done through the adaptation of some of the rules and regulations. It can
be said both the hospital authority and the clerk are responsible for the incident. However, there
are some of the positive changes adopted by the hospital authority after this incident. Certain
recommendations are made for prevention of the further fraud incident in the hospital. It can be
said that those recommendations will be helpful for the improvement of the whole situation.

8
HEALTHY HOSPITAL
References
Asare, S.K., Wright, A. and Zimbelman, M.F., 2015. Challenges facing auditors in detecting
financial statement fraud: Insights from fraud investigations. Journal of Forensic & Investigative
Accounting, 7(2), pp.63-112.
DeZoort, F.T. and Harrison, P.D., 2018. Understanding auditors’ sense of responsibility for
detecting fraud within organizations. Journal of Business Ethics, 149(4), pp.857-874.
Donelson, D.C., Ege, M.S. and McInnis, J.M., 2016. Internal control weaknesses and financial
reporting fraud. Auditing: A Journal of Practice & Theory, 36(3), pp.45-69.
Drogalas, G., Pazarskis, M., Anagnostopoulou, E. and Papachristou, A., 2017. The effect of
internal audit effectiveness, auditor responsibility and training in fraud detection. Accounting and
Management Information Systems, 16(4), pp.434-454.
Huang, S.Y., Lin, C.C., Chiu, A.A. and Yen, D.C., 2017. Fraud detection using fraud triangle
risk factors. Information Systems Frontiers, 19(6), pp.1343-1356.
Johansson, E. and Carey, P., 2016. Detecting fraud: The role of the anonymous reporting
channel. Journal of business ethics, 139(2), pp.391-409.

9
HEALTHY HOSPITAL
Kummer, T.F., Singh, K. and Best, P., 2015. The effectiveness of fraud detection instruments in
not-for-profit organizations. Managerial Auditing Journal, 30(4/5), pp.435-455.
Mansor, N., 2015. Fraud triangle theory and fraud diamond theory. Understanding the
convergent and divergent for future research. International Journal of Academic Research in
Accounting, Finance and Management Science, 1, pp.38-45.
McMahon, R., Pence, D., Bressler, L. and Bressler, M.S., 2016. NEW TACTICS IN FIGHTING
FINANCIAL CRIMES: MOVING BEYOND THE FRAUD TRIANGLE. Journal of Legal,
Ethical & Regulatory Issues, 19(1).
Othman, R., Aris, N.A., Mardziyah, A., Zainan, N. and Amin, N.M., 2015. Fraud detection and
prevention methods in the Malaysian public sector: Accountants’ and internal auditors’
perceptions. Procedia Economics and Finance, 28, pp.59-67.
Petraşcu, D. and Tieanu, A., 2014. The role of internal audit in fraud prevention and
detection. Procedia Economics and Finance, 16, pp.489-497.
Raiborn, C., Butler, J.B., Martin, K. and Pizzini, M., 2017. The Internal audit function: A
prerequisite for good governance. Journal of Corporate Accounting & Finance, 28(2), pp.10-21.