Accounting
Ethically
It is quite obvious after reading the division of responsibility and the
actions of the employees of Dr. Conrad’s office, that there are ethical issues
at play. In light of this, it would be crucial to have the owner of the office, Dr.
Conrad, reconcile the bank statement. According to an article in The Journal
of Medical Practice management, “The physician should always be part of
the process… In small offices where there are fewer employees to handle
the financial aspects, it is very important that the physician participate in the
process” (Weinstock, 2010, para. 15). Knowing that the ‘boss’ will be
involved in the accounting process could prove to be a major deterrent for
the employees’ behavior.
Even though there is a division of responsibilities, which is listed as an
internal control in our text (Wild, Shaw, & Chiappetta, 2013), the employees
are working together to cover their fraud. Ms. Diamond is careful to ensure
that an account is being credited when posting the deposit. This means that
the cash deposits listed from the bank will match deposits in the books, thus
not uncovering the fraud.
Detection of the fraud would probably go unnoticed for quite some
time unless a third party were to get involved. For instance, a cashier at the
bank might think it is strange that Mr. Patton comes in to cash a check from
a patient. The cashier could notify the bank manager, who may then call Dr.
Conrad directly to see if she had authorized him to cash the check. There is
also the possibility that if Dr. Conrad were to become more involved in the
accounting process she may notice an influx in the ‘miscellaneous credit’
account and ask for an explanation.
In order to prevent this type of fraud from occurring there could be
some additional procedures put into place as internal controls. First and
foremost, Dr. Conrad should become more involved in the accounting
process of her office. Also, I know that many offices require that checks for
deposit are stamped as such. This could prevent employees, however, an
employee would still be responsible for stamping the check once it was
received. As an aside, Dr. Conrad could remove any additional signature
cards except for her own and the employee responsible for accounts
payable. By adjusting the division of duties in a way that does not allow for
the same employee to make deposits and make payment for expenses, it
would ensure that the checks couldn’t be cashed because the responsible
employee would have authorized to endorse the check. It may also be a
good idea, if it is financially feasible, to implement an internal control to
insure assets and possibly bond the employees that handle the money.
The bible is full of scripture based on honesty, ethics, and trust. The
issue of fraud deals with all of these. I think the most important piece of
scripture that cuts to the quick of the matter is Luke 16:1011 “Whoever can
be trusted with very little can also be trusted with much, and whoever is
dishonest with very little will also be dishonest with much. So if you have not
been trustworthy in handling worldly wealth, who will trust you with true
riches? And if you have not been trustworthy with someone else’s property,
who will give you property of your own?” (New International Version). This
verse is very fitting to the situation presented. These three employees, who
Dr. Conrad put in trust in, were not trustworthy when it came to handling her
property. Regardless of the
justifications they tried to use, i.e. low pay, they are still breaking the trust
of not only their employer, but God as well. In our lives we become so
overcome with the need to justify our existence with things of monetary
value that we overlook something way more valuable, our salvation.
Weinstock, D. (2010). Reducing theft and embezzlement by encouraging
ethical behavior. The Journal of Medical Practice Management : MPM, 25(4),
2513. Retrieved from http://search.proquest.com/docview/219980322?
accountid=12085
Wild, J. J., Shaw, K. & Chiappetta, B. (2013). Fundamental accounting
principles (21st ed.). New York, NY: McGrawHill
