Conrad should probably reconcile the bank statement

Info icon This preview shows pages 35–39. Sign up to view the full content.

View Full Document Right Arrow Icon
Conrad should probably reconcile the bank statement herself as well as make it a practice to review the daily posting log for miscellaneous credits. Also, she should implement a policy whereby she is the only one to authorize any miscellaneous credits to patient accounts. 8-35
Image of page 35

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Chapter 08 - Cash and Internal Controls Communicating in Practice BTN 8-4 B Memorandum To: “Owner” From: “Consultant” Date: __________ Subject: Advice on monitoring purchase discounts [Instructor’s Note: The response should acknowledge the owner’s concern and recommend the net method of recording purchases. It should explain how this method results in the recording of “Discounts Lost,” which will flow through to the income statement, thus providing the information desired. The memo might look something like the following.] The net method gives management an advantage in controlling and monitoring purchase discounts. When invoices are recorded at gross amounts, the amount of discounts taken is deducted from the balance of the Merchandise Inventory account. This means that the amount of any discounts lost is not reported in any account or on the income statement. Consequently, discounts lost are unlikely to come to the attention of management. However, when purchases are recorded at net amounts, a discounts lost expense is brought to management’s attention as an operating expense on the income statement. Management can then seek to identify the reason for discounts lost, such as oversight, carelessness, or unfavorable terms. This practice gives management better control over persons responsible for paying bills on time to take advantage of favorable discounts. This also means it’s less likely that favorable discounts are lost. 8-36
Image of page 36
Chapter 08 - Cash and Internal Controls Taking It to the Net BTN 8-5 [Instructor Note: These answers were taken from the 2008 Report to the Nation .] 1. The median loss caused by occupational frauds was $175,000 . 2. More than one-quarter of fraud cases caused at least $1 million in losses. 3. Companies lose 7% of their annual revenues to fraud; this 7% figure translates to $994 billion in fraud losses. 4. The typical length of fraud schemes was 2 years from the time the fraud began until it was detected. 5. Companies that conducted surprise audits suffered a median loss of $70,000 , whereas those without surprise audits had a median loss of $207,000 . 6. The median loss suffered by companies with fewer than 100 employees was $200,000 per scheme. 7. Check tampering and fraudulent billing were the most common small business fraud schemes. 8. 35% of respondents cited inadequate internal controls as the primary contributing factor in the frauds investigated. 9. Only 7% of the perpetrators had convictions prior to committing their frauds. 8-37
Image of page 37

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Chapter 08 - Cash and Internal Controls Teamwork in Action BTN 8-6 Common internal controls visible in a typical retail store include: 1. Door locks and roll-down screens for after-hours lock-up.
Image of page 38
Image of page 39
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern