Sometimes, however, the physician who is to perform the respective services approves credit based on an interview. When credit is approved, the physician files a memo with one of the clerks to set up the receivable using data the physician generates. The servicing physician prepares a charge slip that is to one of the clerks for pricing and preparation of the patient’s bill. At the end of the day, one of the clerks uses the bills to prepare a revenue summary and, in cases of credit sales, to update the accounts receivable subsidiary ledger. The front office clerks receive cash and checks directly from patients and give each patient a prenumbered receipt. The clerks take turns opening the mail. The clerk who opens that day’s mail immediately stamps all checks deposit only.” Each “for day, just before lunch, one of the clerks prepares a list of all cash and checks to be deposited in Parktown’s bank account. The office is closed from 12 noon until 2:00 p.m. for lunch. During that time, the office manager takes the daily deposit to the bank. During the lunch hour, the clerk who opened the mail that day uses the list of cash receipts and checks to update patient accounts. The clerks take preparing and mailing monthly statements to patients with unpaid balances. One of the clerks writes off uncollectible accounts only after the physician who performed the respective services believes the account will not pay and communicates that belief to the office manager. The office manager then issues a credit memo to write off the account, which the clerk 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. Identify at least three control weaknesses at Parktown. Describe the potential threat and exposure associated with each weakness, and recommend how to best correct them. (CPA Examination, adapted) 1. Weakness: The employees who perform services are permitted to approve credit without an external credit check. Threat: Sales could be made that turn out to be uncollectible.
Sometimes, however, the physician who is to perform the respective services approves credit based on an interview. When credit is approved, the physician files a memo with one of the clerks to set up the receivable using data the physician generates. The servicing physician prepares a charge slip that is to one of the clerks for pricing and preparation of the patient’s bill. At the end of the day, one of the clerks uses the bills to prepare a revenue summary and, in cases of credit sales, to update the accounts receivable subsidiary ledger. The front office clerks receive cash and checks directly from patients and give each patient a prenumbered receipt. The clerks take turns opening the mail. The clerk who opens that day’s mail immediately stamps all checks “for deposit only.” Each day, just before lunch, one of the clerks prepares a list of all cash and checks to be deposited in Parktown’s bank account. The office is closed from 12 noon until 2:00 p.m. for lunch. During that time, the office manager takes the daily deposit to the bank. During the lunch hour, the clerk who opened the mail that day uses the list of cash receipts and checks to update patient accounts. The clerks take preparing and mailing monthly statements to patients with unpaid balances. One of the clerks writes off uncollectible accounts only after the physician who performed the respective services believes the account will not pay and communicates that belief to the office manager. The office manager then issues a credit memo to write off the account, which the clerk 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. Identify at least three control weaknesses at Parktown. Describe the potential threat and exposure associated with each weakness, and recommend how to best correct them. (CPA Examination, adapted) 1. Weakness: The employees who perform services are permitted to approve credit without an external credit check. Threat: Sales could be made that turn out to be uncollectible.
rais12_Sm_CH12.docx