Accounting and Auditing Enforcement Releases (AAER)

What does AAER stand for in healthcare compliance?

AAER is an acronym that stands for “Accounting and Auditing Enforcement Releases.” 

 

What is Accounting and Auditing Enforcement Releases (AAER)?

AAERs have been presented by the United States Securities and Exchange Commission (SEC) from 1982 to date. When an investigation is conducted against an officer, a certain auditor, or even an entire corporation that allegedly engaged in an accounting misconduct, auditing misconduct, or both, an AAER will be released either during the investigation or after the investigation has been completed. The AAER database, maintained by the United States Securities and Exchange Commission, contains three specific files: the details, the quarterly files, and the annual files. It is important to note that both the quarterly and annual files are composed of information directly sourced from the detail files. They are arranged according to the time that the misstatement happened. 

 

In the Detail File, the following can be found:

  • AAER numbers assigned to specific firms
  • An explanation as to why the AAER was released
  • Firm name
  • Firm identifiers
  • Income statement accounts or balance sheets directly impacted by transgression
  • For each firm, an observation regarding the misstatement occurrence

 

In the Quarterly Files, the following can be found:

  • Firm name
  • Firm identifiers
  • AAERs with the alleged misstatements
  • Information regarding the earnings or revenue statements (understated or overstated)
  • For each affected quarter, an observation regarding the misstatement occurrence 

 

In the Annual Files, the following can be found:

  • Firm name
  • Firm identifiers
  • AAERs with the alleged misstatements
  • Information regarding the earnings of revenue statements (understated or overstated)
  • For each affected year, an observation regarding the misstatement occurrence

 

AAERs impart varying amounts of information regarding the parties involved, the specific misconduct, and the effects of such parties on financial statements for each investigation. According to USC School of Business, 49.04% of the 3,715 AAERs released are issued against the officer of a company, while only 16.15%, 14.64%, and 13.49% are issued against an auditor, a company, or the officer and company, respectively. Additionally, misstatements often include the following categories:

 

  • Revenue
  • Inventory
  • Shareholder equity accounts
  • Costs of goods
  • Liabilities
  • Payables
  • Capitalized costs
  • Reserve accounts
  • Marketable securities

 

Finally, as mentioned before, the effects on financial statements usually fall into the category of understatement or overstatement. 

In terms of healthcare compliance, AAERs are bad news. If the United States Securities and Exchange Commission issues an AAER regarding a healthcare officer, auditor, or corporation, any person with access to the internet will know of the officer’s, auditor’s, or corporation’s fraudulent behaviors. In short, AAERs that are provided by the U.S. SEC in regard to healthcare organizations decrease public confidence in the organization, negatively impact the organization, and ultimately indicate the organization’s healthcare noncompliance. 

 

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