Cash, Fraud, and Internal Control Main objectives To apply an understanding of internal controls. To an understanding of unethical behavior and how address it. To apply an understanding of controls dealing with segregation of duties and checks and balances. To apply the theoretical knowledge in the syllabus to a case study. To know the company's financial statements in detail. To apply financial analysis techniques. To apply the concept of value creation. Description of the activity and instructions 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 segregate 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. Know then destroys the remittance advice accompanying the check. Finally, Diamond posts payment to the customer’s accounts 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. Who is the best person in Dr. Conrad’s office to reconcile the bank statement? Would a bank reconciliation uncover this office fraud? What are some procedures to detect this type of fraud? Suggest additional internal controls that Dr. Conrad could implement.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Cash, Fraud, and Internal Control

Main objectives

To apply an understanding of internal controls.
To an understanding of unethical behavior and how address it.
To apply an understanding of controls dealing with segregation of duties and checks and balances.
To apply the theoretical knowledge in the syllabus to a case study.
To know the company's financial statements in detail.
To apply financial analysis techniques.
To apply the concept of value creation.

Description of the activity and instructions

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 segregate 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. Know then destroys the remittance advice accompanying the check. Finally, Diamond posts payment to the customer’s accounts 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.