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Harriet Knox. Ralph Patton, and Marcia Diamond work for a family physician. Dr. Gwen Conrad, who...

Question:

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 cash receipt duties as follows. Knox opens the mail and prepares a triplicate list of money received. She sends a copy of the list to Patton, the cashier who deposits the receipts daily to the bank. Diamond recordkeeper receives a copy of the receipts 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 in the bank. Knox then destroys the remittance advice 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.

Accounting:

Accounting refers to the business term that is used to make the record of all the monetary and monetary transactions of a business. It helps to analyze the change in the business position from year to year. It also helps to keep evidence of the deals.

Answer and Explanation:

1. Who is the best person in Dr. Conrad's office to reconcile the bank statement?

Dr. Gwen Conrad will be the best person to reconcile the bank statement because Dr. Conrad has better knowledge about office management practices.

2. Would a bank reconciliation uncover this office fraud?

Yes, bank reconciliation would uncover this office fraud as it will show all the transactions.

3. What are some procedures to detect this type of fraud?

If Dr. Conrad compares the bank statement and the bank reconciliation statement, it will be very easy to detect the fraud as the bank reconciliation statement does not show the amount paid for expensive lunch, and that can be seen in the bank statement.

4. Suggest additional internal controls that Dr. Conrad could implement.

Dr. Conrad could analyze the statements such that bank statement and bank reconciliation statements every month as it will help to reduce such type of frauds because it will increase the fear of getting caught in the employees.


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Basic Accounting Terms & Phrases

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