PLEASE ANSWER THESE 2 QUESTIONS

1. Harriet Knox, Ralph Patton, and Marcia Diamond work for a family physician, Dr. Gwen Conrad, who is in private practice. Dr. Conrad 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 recordkeeper, receives a copy of the list and posts payments to patients accounts. About once a month the office clerks have an expensive lunch they pay for as follows. First, Patton endorses a patients check in Dr. Conrads name and cashes it at the bank. Knox then destroys the remittance advice accompanying the check. Finally, Diamond posts payment to the customers account as a miscellaneous credit. The three justify their actions by their relatively low pay and knowledge that Dr. Conrad will likely never miss the money. Required: Who is the best person in Dr. Conrads office to reconcile the bank statement? Would a bank reconciliation uncover this office fraud? What are some procedures to detect this type of fraud? Suggest additional internal controls that Dr. Conrad could implement.

2. Anton Blair is the manager of a medium-size company. A few years ago, Blair persuaded the owner to base a part of his compensation on the net income the company earns each year. Each December he estimates year-end financial figures in anticipation of the bonus he will receive. If the bonus is not as high as he would like, he offers several recommendations to the accountant for year-end adjustments. One of his favorite recommendations is for the controller to reduce the estimate of doubtful accounts.

Required:

What effect does lowering the estimate for doubtful accounts have on the income statement and balance sheet?

Do you believe Blairs recommendation to adjust the allowance for doubtful accounts is within his rights as manager, or do you believe this action is an ethics violation? Justify your response.

What type of internal control(s) might be useful for this company in overseeing the managers recommendations for accounting changes?