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Financial & Managerial Accounting
Found in: Page 316
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

BTN 6-3 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 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. 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

2. Would a bank reconciliation uncover this office fraud?

Answer

No, the Bank reconciliation statement cannot uncover the office fraud.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Introduction to topic

Corporate fraud: Corporate fraud alludes to illegal operations embraced by an individual or organization done in an untrustworthy or unethical way. Frequently, this sort of business fraud is intended to give a benefit to the perpetrating individual or company.

Step 2: Detailed explanation

Unfortunately, because of the collusion of the employees, the bank reconciliation won't distinguish this fraud. The cash deposits as per the books will reconcile to the cash deposits as per the bank. If income reconciliation took place with receipt, then there is a chance that fraud will uncover.

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