67. Gramercy Health Care is a partnership of 6 physician ciwners, 2 nurse practitioners, 10 nurses, 3 axunting clerks, 2 receptionists, and an office manager. The office manager and all of the acxounting clerks have their own PCs, and the receptionists share a PC. These PCs are connected Larough a local area betwork. They are password protected, and the managing partner keeps a record of all passwords. The practice uses a standard medical services soltware package that cannot be modified. Following is a description of the revenues and cash collections processes used in this medical practice: Most patients receive medical attention after insurance coverage has been verified by the office manager. Upon entering the medical office, the patient presents proof of insurance to a rexxeptionist. The insurance documentation is photocopied and immediately forwarded to the oflice manager for verification (while the patient is in the waiting room). In some situations, the oblice manager may extend credit on the basis of special circumstances. Approximately 20 percent of the patients pay for services will cash or check al the time of the appointment. Teport is oven to the patient, and the other copy is retained by the second accounting clerk. Depending upon the patient's form of payment, the second accounting clerk will perform one of the who updates the report with pricing information. One copy of this : File an insurance claim and record the related insurance company receivable for any reports that are signed by the office manager as a verification of the patient's insurance coverage. Recurd al jsutient receivable for any reports that are designated by the office manager as approved credit. Receive the cash or check from the patient and record the related cash collection in a cash receipts listing The second accounting clerk prepares a daily summary of patient revenues. The first accounting clerk opens the mail each day and handles insurance company correspondences. When collections are received in the mail from insurance companies and patients, they are forwarded to the second anunting clerk for deposit. The second clerk alamps each check For Deposit Only" and prepares a daily cash receipts Listing (wlaich also includes collections from patients who received services that day). One copy of Wais list is relained, and a copy is sent to the third accounting clerk. The third clerk prepares the daily bank deposit slip and retains a copy in a chronological file. This clerk also handles patient correspondences and scheduling and maintains a list of patients whose insurance exwerage has heen apprewed hy the office manager. When patient accounts are not collected within 60 days, the second clerk notifies the allice manager, who analyzes the reasons for all instance of nonpayment. When the insurance company rejects the claim the allice manager reclassifies the receivable from an insurance account to a patient account. The second clerk adjusts the insurance company and patient account files for reclassifications and write-offs. This clerk maintains n listing of patients with uncollectible balances and provides an updted copy cach week to the third clerk, who will not allow patients with this status to schedule new appointments . , Accounts for the numerical sector of service reports, files tax retums, and payroll forms, and performs the monthly bank reconciliations. The CPA firm reports directly to the prepares a trial balance and monthly financial stateenis. In addition, this firen of the . Required: Evaluate the information in each of the following situations as being either an internal control (1) strength, (2) weaknes, cor (3) nct al strength or weaknes. 1. Gramercy Health Care's office manager approves the extension of credit to patients and also authorizes write-offs of uncollectible accounts. 2. Gramercy Health Care's office manager may extend credit based on special circumstances rather than using a formal credit search and established credit limits. 3. Gramercy Health Care extends credit rather than requiring cash or insurance in all cases. 4. The computer software package cannot be modified by the employees of the practice. 5. None of the employees who generate revenues or record revenues are able to write checks. 6. Computer passwords are known only by the individual employees and the managing partner, who has no record-keeping responsibilities. 7. Individual pbysicians document the services they perform on pre-cumbered reports that are used for both recording revenues and patient receipts. 8. Insurance coverage is verified by the office manager before medical services are rendered. 9. The bank reconciliation is prepared by an independent CPA firm. 10. The sequence of precumbered service reports is accounted for a monthly basis by an independent CPA fire. 11. The second accounting clerk receives cash and checks and prepares the daily deposit 12. The second accounting clerk maintains the accounts receivable records and can add or delete receivables information on the PC, 13. The second clerk receives the cash and checks and also records cash receipts. 14. Gramercy Health Care is involved only in medical services and does not have diversified business operations. 67. Gramercy Health Care is a partnership of 6 physician ciwners, 2 nurse practitioners, 10 nurses, 3 axunting clerks, 2 receptionists, and an office manager. The office manager and all of the acxounting clerks have their own PCs, and the receptionists share a PC. These PCs are connected Larough a local area betwork. They are password protected, and the managing partner keeps a record of all passwords. The practice uses a standard medical services soltware package that cannot be modified. Following is a description of the revenues and cash collections processes used in this medical practice: Most patients receive medical attention after insurance coverage has been verified by the office manager. Upon entering the medical office, the patient presents proof of insurance to a rexxeptionist. The insurance documentation is photocopied and immediately forwarded to the oflice manager for verification (while the patient is in the waiting room). In some situations, the oblice manager may extend credit on the basis of special circumstances. Approximately 20 percent of the patients pay for services will cash or check al the time of the appointment. Teport is oven to the patient, and the other copy is retained by the second accounting clerk. Depending upon the patient's form of payment, the second accounting clerk will perform one of the who updates the report with pricing information. One copy of this : File an insurance claim and record the related insurance company receivable for any reports that are signed by the office manager as a verification of the patient's insurance coverage. Recurd al jsutient receivable for any reports that are designated by the office manager as approved credit. Receive the cash or check from the patient and record the related cash collection in a cash receipts listing The second accounting clerk prepares a daily summary of patient revenues. The first accounting clerk opens the mail each day and handles insurance company correspondences. When collections are received in the mail from insurance companies and patients, they are forwarded to the second anunting clerk for deposit. The second clerk alamps each check For Deposit Only" and prepares a daily cash receipts Listing (wlaich also includes collections from patients who received services that day). One copy of Wais list is relained, and a copy is sent to the third accounting clerk. The third clerk prepares the daily bank deposit slip and retains a copy in a chronological file. This clerk also handles patient correspondences and scheduling and maintains a list of patients whose insurance exwerage has heen apprewed hy the office manager. When patient accounts are not collected within 60 days, the second clerk notifies the allice manager, who analyzes the reasons for all instance of nonpayment. When the insurance company rejects the claim the allice manager reclassifies the receivable from an insurance account to a patient account. The second clerk adjusts the insurance company and patient account files for reclassifications and write-offs. This clerk maintains n listing of patients with uncollectible balances and provides an updted copy cach week to the third clerk, who will not allow patients with this status to schedule new appointments . , Accounts for the numerical sector of service reports, files tax retums, and payroll forms, and performs the monthly bank reconciliations. The CPA firm reports directly to the prepares a trial balance and monthly financial stateenis. In addition, this firen of the . Required: Evaluate the information in each of the following situations as being either an internal control (1) strength, (2) weaknes, cor (3) nct al strength or weaknes. 1. Gramercy Health Care's office manager approves the extension of credit to patients and also authorizes write-offs of uncollectible accounts. 2. Gramercy Health Care's office manager may extend credit based on special circumstances rather than using a formal credit search and established credit limits. 3. Gramercy Health Care extends credit rather than requiring cash or insurance in all cases. 4. The computer software package cannot be modified by the employees of the practice. 5. None of the employees who generate revenues or record revenues are able to write checks. 6. Computer passwords are known only by the individual employees and the managing partner, who has no record-keeping responsibilities. 7. Individual pbysicians document the services they perform on pre-cumbered reports that are used for both recording revenues and patient receipts. 8. Insurance coverage is verified by the office manager before medical services are rendered. 9. The bank reconciliation is prepared by an independent CPA firm. 10. The sequence of precumbered service reports is accounted for a monthly basis by an independent CPA fire. 11. The second accounting clerk receives cash and checks and prepares the daily deposit 12. The second accounting clerk maintains the accounts receivable records and can add or delete receivables information on the PC, 13. The second clerk receives the cash and checks and also records cash receipts. 14. Gramercy Health Care is involved only in medical services and does not have diversified business operations