Question

ETHICS CHALLENGE LC1 BTN 8-1 Harriet Knox, Ralph Patton, and Marcia Diamond work for a family physician, Dr. Gwen Conrad, who is in private practice. Dr. Conrad is knowledgeable about office management practices and has segregated the cash receipt duties as follows. Knox opens the mail and prepares a triplicate list of money received. She sends one copy of the list to Patton, the cashier, who deposits the receipts daily in the bank. Diamond, the recordkeeper, receives a copy of the list and posts payments to patients' accounts. About once a month the office clerks have an expensive lunch they pay for as follows. First, Patton endorses a patient's check in Dr. Conrad's name and cashes it at the bank. Knox then destroys the remittance advice Page 324 accompanying the check. Finally, Diamond posts payment to the customer's account as a miscellaneous credit. The three justify their actions by their relatively low pay and knowledge that Dr. Conrad will likely never miss the money. Required 1. Who is the best person in Dr. Conrad's office to reconcile the bank statement? 2. Would a bank reconciliation uncover this office fraud? 3. What are some procedures to detect this type of fraud? 4. Suggest additional internal controls that Dr. Conrad could implement.

Answer 1

Refer the below images for the above asked questions in a detailed way of explanation.
Answer: Conrad's office to 1. who is the best person in Dr. reconcile the bank Statement ? în a small business office it is very important that the owner of the business become involved with Control and oversight . In this medical office it would greatly enhance the internal Control environment it Dr - Conrad reconcites the bank Statements. 2) would a banic reconciliation uncover this office fraud ? unfortunately, due to collusion of the employees, the bank reconciliation will not detect this fraud. The cash deposits per the books will reconcile to the cash deposits per the bank. procedures to type What are detect this of 3) some fraud ? Despite the collusion, the scheme is not foolproof. For example, some ways in which the scheme might be uncovered cor) prevented include the following: a book employee may become suspicious and call Dr. conrad and ask if she is aware that occasionally her employees cash patient checks for cash.

* An astute patient might notice that his/her Statement contains a miscellaneous evedit rather than a cash payment notation. If the patient is aware of accounting practices, then or.conrad might be advised. → Dr. Conrad might be able to detect if she reviews the daily posting most computers in that she might totals for misellaneous credits are different from all cash payment the fraud herself tog generated by see the batch posted at times credits. Dr. Conrad could require As a control or conrad Stamped for Deposit only approval for each miscellaneous Credit could require all checks be when they are received. - 4. suggest additional internal controls that dr. conrad could implement pr. conrad should review her salary schedules for employees to make sure that she is at least offering market pay. She may want to consider bonding her employees to insure herself against medical losses. Dr. Conrad should herself as well as posting log for a policy whereby any miscellaneous probably reconcute the bank Statement make it a practice to review the daily miscellaneous credits. Also, she should implement She is the only one to authorize credits to patient accounts ..