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 additiona

Answer 1

The best person to perform bank reconciliations should be separate from cash receipt duties to prevent fraud. Procedures like regular audits and internal controls can detect and prevent the office fraud, and educating employees on ethics can also be effective.

Step-by-step explanation:

Office Fraud Detection and Prevention

The person best suited to reconcile the bank statement in Dr. Conrad's office should be someone who is not involved with the cash receipt duties to avoid conflicts of interest. Having an external party or a trusted individual who is entirely separate from the day-to-day financial transactions would be the most effective choice. A bank reconciliation performed by such a person could potentially uncover the office fraud taking place, as inconsistencies between the bank statement and recorded receipts could be spotted.

To detect this type of fraud, procedures might include regular audits, setting up a system where multiple signoffs are required for certain transactions, and employing surprise cash counts. Additionally, staff should not be allowed to handle multiple duties related to transactions, and there should be a strict separation of responsibilities.

To prevent further office fraud, Dr. Conrad could implement internal controls such as having checks and balances, ensuring that financial duties are segregated even further, and conducting thorough and regular reviews of financial operations by an external auditor. Educating staff on ethical work behavior and the consequences of fraud can also serve as a deterrent.

Answer 2

The best person to reconcile the bank statement would be Ralph Patton, the cashier. A bank reconciliation would likely uncover this office fraud. Some procedures to detect this type of fraud include regularly reviewing and comparing bank statements, implementing internal controls, and conducting surprise audits.

Step-by-step explanation:

1. The best person in Dr. Conrad's office to reconcile the bank statement would be Ralph Patton, the cashier. As the one responsible for depositing the receipts to the bank, Patton would have the most accurate records of the funds that should be reflected on the bank statement.

2. Yes, a bank reconciliation would likely uncover this office fraud. A bank reconciliation involves comparing the records of cash receipts and payments in the office to the bank statement. By reconciling the records, discrepancies and irregularities, such as the fraudulent activities described, may be identified.

3. Some procedures to detect this type of fraud include:

• Regularly reviewing and comparing bank statements with cash records and related documentation
• Implementing internal controls such as segregation of duties, where different individuals are responsible for different aspects of the cash receipt process
• Conducting surprise audits or checks of cash records and transactions

4. Suggest additional procedures to prevent and detect this type of fraud could include:

• Implementing a reporting system for employees or colleagues to report any suspicions of fraudulent activity
• Training and educating employees on ethical behavior and the importance of reporting any irregularities
• Establishing a strong ethical culture within the workplace that discourages fraudulent activities