Parktown Medical Center, Inc. is a small health care provider owned by a publicly held corporation. It employs seven salaried physicians, ten nurses, three support staff, and three clerical workers. The clerical workers perform such tasks as reception, correspondence, cash receipts, billing, and appointment scheduling. All are adequately bonded.

Most patients pay for services rendered by cash or check on the day of their visit. The clerical staff does not approve credit. They physician who is to perform the respective services approves credit based on an interview. When credit is approved, the physician files a memo with the billing clerk (clerk 2) to set up the receivable from data the physician generates.

The servicing physician prepares a charge slip that is given to clerk 1 for pricing and preparation of the patients bill. Clerk 1 transmits a copy of the bill to clerk 2 for preparation of the revenue summary and for posting in the accounts receivable subsidiary ledger.

The cash receipts functions are performed by clerk 1, who receives cash and checks directly from patients and gives each patient a prenumbered cash receipt. Clerk 1 opens the mail and immediately stamps all checks for deposit only and lists cash and checks for deposit. The cash and checks are deposited daily by the office manager. The list of cash and checks, with the related remittance advices, are forwarded by clerk 1 to clerk 2. Clerk 1 also serves as the office receptionist with general correspondence duties.

Clerk 2 prepares and sends monthly statements to patients with unpaid balances. He also prepares the cash receipts journal and is responsible for the accounts receivables subsidiary ledger. No other clerical employee is permitted access to the accounts receivable subsidiary ledger. Clerk 2 writes off uncollectible accounts only after the physician who performed the respective services believes the account will not pay and communicates the write-off to the office manager. The office manager then issues a write-off memo, which clerk 2 processes.

The office manager supervises the clerks, issues write-off memos, schedules appointments for the doctors, makes bank deposits, reconciles bank statements and performs general correspondence duties.

Additional services are performed monthly by a local accountant who posts summaries prepared by the clerks to the general ledger, prepares income statements and files the appropriate payroll forms and tax returns. The accountant reports directly to the parent corporation.

Required:

Identify at least four control weaknesses at Parktown. Describe the potential threat and exposure associated with each weakness, and recommend how to best correct them.