EC $7-1$

Marge Page, Daisy Tu$,$ and Colleen Walker work for a dentist, Dr$.$

Linda Thomson, who is in a private practice. Dr$.$ Thomson is fairly

knowledgeable about sound office management practices and has

separated the cash receipt duties as follows. Marge opens the mail

and prepares a triplicate list of money received. She sends one copy

of the list to Daisy, the cashier, who deposits the receipts daily in the

bank. Colleen, the recordkeeper, also receives a copy of the list and

posts payments to patients$$ accounts. About once a month the office

clerks decide to have an expensive lunch compliments of Dr$.$

Thomson. Daisy endorses a patient$$s cheque in Dr$.$ Thomson$$s name

and cashes it at the bank. Marge destroys the remittance advice

accompanying the cheque. Colleen posts the payment to the

customer$$s account as a miscellaneous credit. The clerks justify their

actions given their relatively low pay and knowing that Dr$.$ Thomson

will likely never miss the payment.

Required

$1.$ Who would be the best person in Dr$.$ Thomson$$s office to

reconcile the bank statement?

$2.$ Would a bank reconciliation detect the office fraud scheme?

$3.$ What are some ways of uncovering this type of scheme?

$4.$ Suggest additional internal controls that Dr$.$ Thomson might

want to implement.