What it is
Physician practices record patient revenue net of payor adjustments and expected nonpayment, so the largest estimate in the file is the contractual allowance and bad debt. The checklist tests that estimate with collection history and subsequent receipts, and tests the billing system reports that feed it.
It also lists the regulatory inquiries an auditor makes in this sector, including billing compliance, referral arrangements, payor audits and privacy. Those are inquiry and disclosure items for the auditor; they are not legal conclusions, and counsel should be consulted.
When to use it
- Planning an audit of a physician, dental or group practice.
- When the practice is part of an MSO or private equity structure.
- To document the response to payor audit and compliance risks.
What’s inside
- Structure, payor mix and billing system reliability
- Net patient revenue, allowance and subsequent collection testing
- Regulatory and compliance inquiries under AU-C 250
- Supplies, equipment, leases, malpractice coverage and payroll
- Disclosure of concentrations and related parties
Standard cited
This template follows AU-C 330 / ASC 606 / AU-C 250. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 330 explained, AU-C 250 explained.
Questions
How do you test the contractual allowance?
Recompute it from collection history by payor class and compare with cash received after year end. Test the billing system reports used in the calculation for completeness and accuracy (AU-C 500, AU-C 540).
Is the auditor responsible for finding Stark or anti-kickback violations?
No. Under AU-C 250 the auditor considers laws with a direct effect on the statements and performs inquiry and reads documents for others. Possible violations the auditor finds should be evaluated and discussed with management and counsel.
What is a friendly physician or MSO structure?
Many states restrict who may own a medical practice, so an MSO often provides management services to a practice owned by physicians. The auditor evaluates whether the practice is a variable interest entity to be consolidated (ASC 810).
Related templates
- Payroll Audit Checklist
- Audit Program: Accounts Receivable and Revenue
- Management Representation Letter (AU-C 580)
Last updated 11/05/2026. All free templates.