Evidence

60.7 – Evidence (Rev. 107, Issued: 09-22-06; Effective: 10-01-06; Implementation: 10-02-06) The AICPA fieldwork standard on evidence for a financial related audit states that: "Sufficient competent evidential matter is to be obtained through inspection, observation, inquiries, and confirmations to afford a reasonable basis for an opinion regarding the financial statements under examination." The GAS fieldwork standard on evidence for a financial related audit states that: “A record of the auditors’ work must be retained in the form of working papers.” While the Medicare auditor does not express an opinion on financial statements, he/she is responsible for collecting sufficient and competent evidential data as a basis for drawing conclusions about the Medicare cost report. Ensure that evidence obtained during the course of the in-house or field audit is sufficient to enable the auditor to support conclusions, adjustments, and recommendations. Make sure that there is enough factual and convincing evidence so that a prudent person can arrive at the same conclusion of fact as the auditor. In addition, evidence must be competent and relevant. That is, evidence must be valid and reliable and have a logical relationship to the issue/subject under review. A. Sources and Categories of Evidence Review all evidence, no matter from what source, with appropriate professional skepticism. The auditor must keep an open mind, but must question the validity of all evidence and must determine its application to the situation under review. In addition, evidence uncovered by an auditor that the provider has used in another situation, such as a bank loan application, public stock filing, insurance claim, other government reports (e.g., tax returns, SEC filings), or reports from an outside agency have greater credibility than conflicting or self-serving evidence offered by the provider concerning the audit. Obtain sufficient, competent evidence to ensure the propriety of costs claimed by the provider on its submitted Medicare cost report in order to determine that proper payment is made for services provided to Medicare beneficiaries. The evidence consists of physical inspection or observation and corroborating documents such as checks, invoices, contracts, vouchers, assignment/rotation schedules for interns and residents, minutes of meetings, and written or oral testimony of provider employees. Base your audit tests on the best evidence available. Consider the probative value of evidence offered in context of the hierarchy of order and types of evidence. Never rely on evidence of a lower order or type if you can reasonably conclude that evidence of a higher order or type is available. Insist that providers produce evidence of the highest order and type that you believe is available. Categories of evidence include: y Physical Evidence.–This is obtained from direct observation or inspection of property, equipment, inventory, cash, activities, or events. However, in certain circumstances, physical evidence may not be sufficient, especially if the auditor has to rely on personal knowledge to determine the propriety or value. y Documentary Evidence.–This type of evidence is the most commonly used and referred to by an auditor. It is created information such as letters, contracts, accounting records, invoices, checks, interns’ and residents’ rotation schedules, etc. y Analytical Evidence.–This is developed by the auditor through calculations, analysis, comparisons, and reasoning. It can be used to test the provider's calculations, account breakdowns, statistics, and allocations. y Testimonial Evidence.–This is probably the least reliable type of evidence. It is obtained from others, both inside and outside the provider's organization, through responses to inquiries and interviews. (By itself, this category of evidence is unacceptable for Medicare purposes. Therefore, evaluate all such information and corroborate with additional evidence.) In evaluating the effectiveness and usefulness of evidence, consider whether the audit objectives have been achieved. If the audit objectives were not achieved, the evidence was either not sufficient or was only sufficient to establish that there was a problem. Obtain additional evidence in order to reach a valid conclusion and achieve the audit objective. If there is sufficient and reliable evidence that supports a conclusion that the provider’s reported reimbursement amount for a specific area is incorrect, make an appropriate adjustment and document it in the working papers. Likewise, if the provider does not furnish sufficient and reliable evidence to support the reported reimbursement amount for a specific area, make an adjustment to disallow the reimbursement in question. (See 42 CFR 413.20(a), 42 CFR 413.24(a), and §§60.10, 60.11, and 60.12 of this chapter.)