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Northern State University ACCOUNTING ACCT 360 Accounting Systems-Chapter 12 Problem with verified solutions

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Problem 12.8: a) Identify at least three control weaknesses at Parktown’s revenue cycle procedures, explain the associated problem, and purpose a solution. Present your answer in a threecolumn tab... le with these headings: Weakness, Problem, Solution. Weakness: Problem: Solution: The employees who perform certain services are permitted to approve credit without an external credit check. Sales could be made that turn out to be uncollectible. Someone other than the physician performing the services should be doing a credit check. Credit limits should be established and used to control the amount of credit offered. The physician who approves credit also approves the writeoff of uncollectible accounts. Accounts receivable could be understated and bad debts expense overstated because of the write-offs of accounts could be approved for accounts that are collectible. In reverse, AR could be overstated and bad debt expense could be understated because of write-offs not being initiated for accounts that are uncollectible. Separate the duties of approving credit and approving write-offs of accounts receivable to avoid any overstated and understated account balances. The employee who initially handles cash receipts also prepares billings and maintains accounts receivable. Potentially, theft by lapping could occur do to this weakness. Fees earned and cash receipts or accounts receivable could be understated because of omitted or inaccurate billing. Segregate the function of cash receipts handling accounts and billing accounts receivable to avoid understated accounts from omitting inaccurate billings. b) Draw a BPMN diagram to depict Parktown’s revenue cycle revised to incorporate your solutions to step a. (CPA Examination, adapted) [Show More]

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