Session 1
Introduction to Financial Statements
Evaluating financial statements is important because it provides insight into a company's financial health and performance, allowing stakeholders to make informed decisions. By analysing financial statements, you can assess the company's profitability, liquidity, and solvency, and make better decisions. Therefore, the purpose of this session is to evaluate the following financial statements: income statement, balance sheet, and cash flow statement of a health organisation (The Netcare Group).
Activity 3.1.1: Audit Process
Explain the audit process, and the purpose in the overall review of financial statements. Ensure you provide examples from the financial statements reviewed above.
Describe the audit process
Besides being a lawful requirement in many cases, the audit process involves the professional opinion of an external party to examine the financial statements produced by an organisation, and for that party to give a professional opinion on whether the financial statements fairly reflect the organisation’s performance over a specific period (through income statements) and the financial position as of a specific date (through a balance sheet). This process is guided by a framework of generally accepted auditing standards (GAAP) which comprises of a series of test. The end of the audit process results in an opinion that is attached to the financial statements when they are released to the stakeholders.
What is the purpose of the audit process?
The purpose of auditing to provide the organisation’s owners and stakeholders with an overview of the organisation’s financial standing to make economic decisions, potential investors that may buy shares and suppliers or lenders who are considering doing business with the organisation. A thorough audit process can also provide insight about where to improve operational management and processes.
References:
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Russo, K. (2023, April 6). What Is a Financial Statement Audit? Oracle NetSuite. https://www.netsuite.com/portal/resource/articles/financial-management/financial-statement-audit.shtml#:~:text=There%20are%20three%20phases%20to,effectiveness%20of%20the%20control%20environment.
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Pwc. Understanding a financial statement audit. Available at https://www.pwc.com/im/en/services/Assurance/pwc-understanding-financial-statement-audit.pdf
Further Learning
Leadership, Governance, and Strategic Approaches in Health Systems
Leadership and governance are two interdependent pillars essential for effective health systems. The 2000 WHO Report on health systems brought new attention to stewardship as a vital component of the development health systems worldwide. This was later given the term leadership and governance. The importance of leadership and governance has been affirmed through longitudinal and cross-country analyses in Thailand. Similarly, the Alliance for Health Policy and Systems Research (AHPSR) call for participatory leadership in their Flagship Report ‘Open Mindsets: Participatory Leadership for Health’ (Gilson & Agyepong, 2018).
Leadership provides the vision and adaptability required to address challenges. Governance involves the processes by which a society arranges itself to reach shared goals, suggesting that members consent to give up some personal freedoms and delegate a portion of decision-making power to a smaller governing body (Ciccone et al., 2014). We can interpret the development of leadership and governance as two sides of the same coin, a balancing of both software (ideas, interests, interrelationships, trust, power, values and norms) and hardware (human resources, finances, medicines and technology, organizational structures, service infrastructure and information systems). When these components are misaligned, health systems often struggle to achieve desired outcomes. Ramani et al., (2022) found that interventions that aim to improve leadership and governance practices in the health sector often address them as mutually exclusive components of the health system
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Mathole et al., (2018) describes management as “doing thing right” through improving efficiencies, while leadership attempts to do the ‘right things’ through improving effectiveness. However, in complex adaptive systems (CAS), these functions do not operate independently. By understanding the health system as CASs, leadership and governance practices mutually shape each other while simultaneously shaping and being shaped by the wider system. More specifically, constraints and inefficiencies in governance structures or practices inhibit the effectiveness of efforts to improve leadership practices and vice versa. Thus, it stands to reason that strategies that address either function exclusively would fail to break the feedback loop that is sustained by ineffective leadership or governance.
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Leadership in a complex system guides and catalyses different components of the system to achieve common goals while also contributing the realisation of learning, creative and adaptive capacity (Gilson & Agyepong, 2018). Mathole et al., (2018) points to strong evidence associating leadership with several health system outcomes such as health outcomes, patient and staff satisfaction and organisational financial performance. A case study of two hospitals in the OR Tambo District, Eastern Cape attributed one of the underlying factors of the differences in the quality of maternal health services to leadership styles (Lembani et al., 2010). In a similar study in the same province, Mathole et al., (2018) demonstrated that “strong, committed and supportive leadership enables a hospital to develop mechanisms that help them to cope with everyday health systems challenges in a poorly resourced context”. Thus, leadership is a systems issue, it requires collective participation from diverse actors, facilitates different perspectives and encourages displays of leadership from all actors, when necessary, all towards the common goal of an improved health-system performance (Gilson & Agyepong, 2018).
Yet leaders in South Africa’s health system are embedded in a governance culture of “mechanical bureaucracy” and vertical decentralisation that seeks accountability and quality of service delivery through technostructural work processes rather than health outcomes. Governing bodies best address a community's needs when their processes are inclusive, transparent, accountable to all stakeholders, and responsive to the citizen’s demands (Ciccone et al., 2014). Research shows an association between national-level indicators, such as “control of corruption”, and improved health outcomes (Ciccone et al., 2014). There have been increasing calls from the international community for improved coordination, accountability and results in health systems (Ciccone et al., 2014). It can be rigid, hierarchal, bureaucratic (Brauns, 2015). We consider how nurses and doctors in South Africa feel like ‘street-level bureaucrats’ (Hupe & Hill, 2007). Not many professions are as entrenched as medical professions who practice a high degree of self-regulation, which serves to preserve it traditional domination in practice (Hupe & Hill, 2007). They are bound by rules and procedures and restrained by professional rank (Brauns, 2015). Decisions can be contested (Brauns, 2015). Traditional bureaucracy has received criticism for the poor performance of public sectors, restrictive rules and unpleasant and corrupt officials (Brauns, 2015).
of these reforms.