Question

Sam Hill has worked for Dr Lee Chang for several years in the administration of Dr Chang’s medical practice. Sam demonstrates a loyalty that is rare among employees. He hasn't taken a holiday in the last three years. One of Sam's primary duties at the medical office is to open the mail and list the cheques received. He also takes cash from patients when they leave. At times it is so hectic that Sam doesn't bother with giving patients a receipt for the cash paid on their accounts. He assures them he will see to it that they receive the proper credit. When the traffic is slow in the office Sam offers to help Mary post the payments to the patients' accounts receivable. She is always happy to receive his help, because he is a very conscientious worker.

Review the internal control environment in this medical office situation by reference to five principles of internal control.

(Type your response directly into the text box below. Alternatively, you may draft your response in Word and upload as an attachment into the Files section underneath.)

Answer 1

Answer :

The main Principles of Internal controls include the following -

• Establish Responsibilities.
• Maintain Records.
• Insure Assets by Bonding Key Employees.
• Segregate of Duties.
• Mandatory employee Rotation.
• Split Related Party Responsibility.
• Use Technological Controls.
• Perform Regular Independent Reviews.

Internal control environment in this medical office

1. Segregation of duties- There is no segregation of duties in the medical office as Sam Hill is involved in collection of payments, posting of payments and also checking the mail.

2. Establish Responsibilities- Proper distibution of responsibilities is absent in the medical office

3. Maintain Records - There is no proper maintenance of records as Sam collects the cash but doesnt provide them with the receipts

4. Mandatory Employee Rotation- Here the rotation of employees is absent in the the medical office

5. Technological Controls - Technical controls can provide automated protection from unauthorized access or misuse, facilitate detection of security violations, and support security requirements for applications and data. In this medical office Sam is accesing the mail due to weak controls