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Chap008 Solution Manual

• an astute patient might notice that his/her

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Unformatted text preview: • An astute patient might notice that his/her statement contains a miscellaneous credit rather than a cash payment notation. If the patient is aware of accounting practices, then Dr. Conrad might be advised. • Dr. Conrad might be able to detect the fraud herself if she reviews the daily posting log generated by most computers in that she might see the batch totals for miscellaneous credits are posted at times different from all cash payment credits. • Dr. Conrad could require approval for each miscellaneous credit. • As a control, Dr. Conrad could require all checks be stamped ‘For Deposit Only’ when they are received. 4. Dr. Conrad should review her salary schedules for employees to make sure that she is at least offering market pay. She may want to consider bonding her employees to insure herself against material losses. Dr. 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 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 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 ....
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