Question

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

3. What are some procedures to detect this type of fraud?

Short answer

Answer

Dr Conrad shall get on-board an employee that oversees the process of reconciliation. Also, there can be bank reconciliation and income reconciliation with receipt.

Step-by-step solution

Step-by-Step SolutionStep 1: Introduction to topic

Business Ethics- Business ethics is a professional ethics that analyses ethical standards and moral or ethical issues that can emerge in a business climate.

Procedure to detect fraud-

They must maintain proper documentation for all records, and the concerned authority must approve the transactions. The authority should practice a surprise checking process, and Dr Conrad should conduct a daily review of all the activities. A third party should beappointed as an internal auditor for Dr Conrad. Checks received must be marked as ‘For Deposit only’ the moment they are received.