Harriet Knox, Ralph Patton, and Marcia Diamond work for a family physician, Dr. Gwen Conrad, who in private practice. Dr. Conrad is knowledgeable amount 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 record keeper, receives a copy of the list and posts payment’s 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 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
- 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.
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Financial and Managerial Accounting
- Lena, Carrie, and Margaret work for a family physician. The doctor is knowledgeable about office management practices and has segregated the cash receipt duties as follows: Lena opens the mail and prepares a triplicate list of money received. Lena sends one copy of the list to Carrie, the cashier, who deposits the receipts daily in the bank. Margaret, the recordkeeper, receives a copy of the list and posts payments to the patients' accounts. About once a month, the office clerks have an expensive lunch they pay for as follows. First Carrie endorses a patient's check in the doctor's name and cashes it at the bank. Lena then destroys the remittance advice accompanying the check. Finally, Margaret posts payment to the customer's account as a miscellaneous credit. The three justify their actions by their relatively low pay and knowledge that the doctor will likely never miss the money. Would a bank reconciliation uncover this office fraud?arrow_forwardA small branch of Avon Cosmetics in Tuao, employs Amelia Rodriquez as Branch Manager and Mary Gonzales as her sales assistant. The Branch uses a bank account in Tuao, to pay for expenses in the name of Avon Cosmetics-Special Account. To pay expenses, checks must be signed by Amelia Rodriquez or John Dee, the treasurer of Avon Cosmetics. Amelia receives the cancelled checks and bank statements in her records. She also periodically prepares reports of cash disbursements and sends them to the home office in Makati. Required: Identify the weakness /weaknesses in internal control and opposite the identified weakness/weaknesses, enumerate the control procedures that you will recommend to avoid or mitigate the risk of loss.arrow_forwardGoldie and Kate operate a small clothing store that has annual revenues of about $100,000. The company has established the following procedures related to cash disbursements: The petty cash fund consists of $10,000. Employees place a receipt in the fund when making expenditures from it and obtain the necessary cash. For any expenditure not made with the petty cash fund, the employee writes a check. Employees are not required to obtain permission to write a check but are asked to use good judgment. Any check written for more than $5,000can be signed only by Goldie or Kate. Required:Discuss Goldie and Kate’s internal control procedures related to cash disbursements, noting both weaknesses and strengths.arrow_forward
- The A/P clerk of a company writes the checks for vendors, and the controller signs the checks. The A/P clerk has devised a plan to give herself a raise. She creates a new vendor for her friend's business and creates two purchase orders for random car detailing services for $75 and $70. She writes the checks to pay these new vendors knowing the controller will only pay close attention to checks over $100. She delivers the checks to her friend to deposit in his bank account, and then he writes her a personal check for the full amount of $145. What can the company do to prevent this type of behavior?arrow_forwardThe A/P clerk of a company writes the checks for vendors, and the controller signs the checks. The A/P clerk has devised a plan to give herself a raise. She creates a new vendor for her friend's business and creates two purchase orders for random car detailing services for $75 and $70. She writes the checks to pay these new vendors knowing the controller will only pay close attention to checks over $100. She delivers the checks to her friend to deposit in his bank account, and then he writes her a personal check for the full amount of $145. Eventually, what will be the effect of her actionsarrow_forwardThe A/P clerk of a company writes the checks for vendors, and the controller signs the checks. The A/P clerk has devised a plan to give herself a raise. She creates a new vendor for her friend's business and creates two purchase orders for random car detailing services for $75 and $70. She writes the checks to pay these new vendors knowing the controller will only pay close attention to checks over $100. She delivers the checks to her friend to deposit in his bank account, and then he writes her a personal check for the full amount of $145. Respond to the following in a minimum of 175 words: Eventually, what will be the effect of her actions? What can the company do to prevent this type of behavior?arrow_forward
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- Aclient heard through its hotline that John, the purchases journal clerk, periodically en- ters fictitious acquisitions. After John creates a fictitious purchase, he notifies Alice, the accounts payable ledger clerk, so she can enter them in her ledger. When the payables are processed, the payment is mailed to the nonexistent supplier's address, a post office box rented by John. John deposits the check in an account he opened in the nonexistent supplier's name. 5.2arrow_forwardJanice Dodds opens the mail for Ajax Plumbing Company. She lists all customer checks on a spreadsheet that includes the name of the customer and the check amount. The checks, along with the spreadsheet, are then sent to Jim Seymour in the accounting department, who records the checks and deposits them daily in the company’s checking account. Required: Describe how the company could improve its internal control procedure for the handling of its cash receipts.arrow_forwardAppliances Repair and Service Company bills allcustomers rather than collecting in cash when services are provided. All mail is opened byTom Gyders, treasurer. Gyders, a CPA, is the most qualified person in the company who is inthe office daily. Therefore, he can solve problems and respond to customers’ needs quickly.Upon receipt of cash, he immediately prepares a listing of the cash and a duplicate depositslip. Cash is deposited daily. Gyders uses the listing to enter the financial transactions in thecomputerized accounting records. He also contacts customers about uncollected accountsreceivable. Because he is so knowledgeable about the business and each customer, he grantscredit, authorizes all sales allowances, and charges off uncollectible accounts. The owneris extremely pleased with the efficiency of the company. He can run the business withoutspending much time there because of Gyders’ effectiveness.Imagine the owner’s surprise when he discovers that Gyders has committed a…arrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College