Question

What happened in this scenario that should not have happened if financial recording and internal control principles were followed?

a) A facility receives a check by mail for services rendered to a resident.
b) A staff member in the business office immediately stamps the check as "For deposit only" in the name of the facility.
c) She then makes entries in the cash receipts journal and in the resident's account for later posting to the cash account and the accounts receivable account.
d) Later in the day, this staff person goes to the bank, deposits the check in the facility account, and picks up a deposit receipt.
e) Upon her return to the facility, then files the deposit receipt in the file for this purpose.

Answer 1

If financial recording and internal control principles were followed, the staff member in the business office should not have immediately stamped the check as 'For deposit only' in the name of the facility. This lack of separation of duties could lead to potential fraud and errors. Additionally, the staff person should not have filed the deposit receipt herself to maintain proper control over the process.

Step-by-step explanation:

If financial recording and internal control principles were followed, the staff member in the business office should not have immediately stamped the check as 'For deposit only' in the name of the facility. This is because it is important to have a separation of duties to prevent fraud and errors. In this case, the staff member had control over both receiving the check and making the entries in the cash receipts journal, which could lead to a lack of accountability and potential misappropriation of funds.

A better practice would be for a different staff member to stamp the check as 'For deposit only' and another staff member to make the entries in the cash receipts journal. This creates a system of checks and balances to ensure accuracy and reduce the risk of fraud.

In addition, the staff person should not have filed the deposit receipt herself. It would be more appropriate for a different staff member to file the deposit receipt, again to maintain separation of duties and reduce the risk of unauthorized access to the deposit receipt.