BOROUGH OF MANHATTAN COMMUNITY COLLEGE The City University of New York Accounting Department CZS Medical Facilities...

 

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BOROUGH OF MANHATTAN COMMUNITY COLLEGE The City University of New York Accounting Department CZS Medical Facilities CZS Medical Facilities is a med-sized health care provider traded on the NASDAQ. CZS employs twenty physicians, forty nurses, twenty support staff, and ten clerical workers. The clerical workers perform such tasks as reception intake, correspondence, cash receipts, billing, appointment scheduling, checking patients' medication, screening for COVID and drawing blood from patients for sample testing. Most patients pay for services rendered by cash or check on the day of their visit. 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 given 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 to update the accounts receivable subsidiary ledger. The front office clerks receive cash and checks directly from patients. The office clerks 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 CZS's bank account. The office is closed from 11:30 AM until 3:30 PM for lunch. Each Friday, when the office is closed, the office manager takes the deposits to the bank. Checks are deposited each week. During lunch time, the clerk who opened the mail that day uses the list of cash receipts and checks to update patient accounts. The clerks take turns preparing and mailing monthly statements to patients with unpaid balances. One of the clerks write 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 any clerk processes. Further, a reliable CZS physician heard through its internal hot line that Pat, the purchases journal clerk, periodically enters fictitious purchases. After Pat creates a fictitious purchase, he notifies Judy, the accounts payable ledger clerk, so she can enter them in her ledger. When the payables are processed, the payment is mailed to the nonexistent supplier's address, a post office box rented by Pat. Pat deposits the check in an account he opened in the nonexistent supplier's name. Pat is very friendly. Required: In a memo to CZS Management, identify the control weaknesses at CZS Medical Facilities, Inc. 1. Describe the potential threat and exposure associated with each weakness; 2. Recommend how to best mitigate each risk. 3. List two personal (as opposed to organizational) fraud symptoms, or red-flags, that indicate that Pat or Judy have committed fraud. Make any assumption to support your suspicion. 4: List two procedures you could follow to uncover Pat's or Judy's fraudulent behavior. Report Format and Upload Instructions: Use the format below to respond to management. List all or every weakness or concern you use. If you have identified more than eight (8) weaknesses, please address each weakness or concern. Suggested format: 11 pt or 12 pt; Times Roman; 1.15 space. Upload memo only. Try to limit your response to less than 3000 words. (No penalty applied if response exceeds or is less than 3000 words.) Potential Fraud Symptoms: The Red Flags of Fraud: 1. 2. Procedures to Mitigate Potential (Use technology to the extent possible): 2. 12 Closing Statement Best Regards, BOROUGH OF MANHATTAN COMMUNITY COLLEGE The City University of New York Accounting Department CZS Medical Facilities CZS Medical Facilities is a med-sized health care provider traded on the NASDAQ. CZS employs twenty physicians, forty nurses, twenty support staff, and ten clerical workers. The clerical workers perform such tasks as reception intake, correspondence, cash receipts, billing, appointment scheduling, checking patients' medication, screening for COVID and drawing blood from patients for sample testing. Most patients pay for services rendered by cash or check on the day of their visit. 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 given 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 to update the accounts receivable subsidiary ledger. The front office clerks receive cash and checks directly from patients. The office clerks 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 CZS's bank account. The office is closed from 11:30 AM until 3:30 PM for lunch. Each Friday, when the office is closed, the office manager takes the deposits to the bank. Checks are deposited each week. During lunch time, the clerk who opened the mail that day uses the list of cash receipts and checks to update patient accounts. The clerks take turns preparing and mailing monthly statements to patients with unpaid balances. One of the clerks write 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 any clerk processes. Further, a reliable CZS physician heard through its internal hot line that Pat, the purchases journal clerk, periodically enters fictitious purchases. After Pat creates a fictitious purchase, he notifies Judy, the accounts payable ledger clerk, so she can enter them in her ledger. When the payables are processed, the payment is mailed to the nonexistent supplier's address, a post office box rented by Pat. Pat deposits the check in an account he opened in the nonexistent supplier's name. Pat is very friendly. Required: In a memo to CZS Management, identify the control weaknesses at CZS Medical Facilities, Inc. 1. Describe the potential threat and exposure associated with each weakness; 2. Recommend how to best mitigate each risk. 3. List two personal (as opposed to organizational) fraud symptoms, or red-flags, that indicate that Pat or Judy have committed fraud. Make any assumption to support your suspicion. 4: List two procedures you could follow to uncover Pat's or Judy's fraudulent behavior. Report Format and Upload Instructions: Use the format below to respond to management. List all or every weakness or concern you use. If you have identified more than eight (8) weaknesses, please address each weakness or concern. Suggested format: 11 pt or 12 pt; Times Roman; 1.15 space. Upload memo only. Try to limit your response to less than 3000 words. (No penalty applied if response exceeds or is less than 3000 words.) Potential Fraud Symptoms: The Red Flags of Fraud: 1. 2. Procedures to Mitigate Potential (Use technology to the extent possible): 2. 12 Closing Statement Best Regards,