Harriet Knox, Ralph Patton, and Marcia Diamond work for a family physician, Dr. Gwen Contrad, who is in private practice. Dr. Contrad 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 record keeper, receives a copy of the list and posts payments to the 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. Contrad'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 clerks justify their actions by their relatively low pay and the knowledge that Dr. Contrad will likely never miss the money.

Discussion Questions:

1. Who is the best person in Dr. Contrad's office to reconcile the bank statement? Simply providing a name is insufficient; you have to explain why this person would be the best one to reconcile the bank statements. 75 to 100 words are expected.
2. Would a bank reconciliation uncover this office fraud? Why or why not? 75-100 words are expected.
3. What are some procedures that would detect this type of fraud?
4. Suggest additional internal controls that Dr. Conrad could implement.