Three office assistants work for Dr. Nancy Darsch, a family physician in private practice. Dr. Darsch is knowledgeable about office management practices and has segregated the cash receipt duties as follows. Assistant 1 opens the mail and prepares a triplicate list of money received. She sends one copy of the list to Assistant 2, the cashier, who deposits the receipts daily in the bank. Assistant 3, the record keeper, receives a copy of the list and posts payments to patients' accounts. About once a month, the office assistants have an expensive lunch they pay for as follows:

Assistant 1 endorses a patient's check in Dr. Darsch's name and cashes it at the bank.

Assistant 2 then destroys the remittance advice accompanying the check.

Assistant 3 posts payment to the customer's account as a miscellaneous credit.

Dr. Darsch has become suspicious of her assistants' actions and has asked you to consult with her. She has three questions that need answering:

How could a bank reconciliation uncover this office fraud?

What procedures could be used to detect this type of fraud?

What additional controls could be implemented to prevent this from happening in the future?