Parktown Medical
Center, Inc.
GROUP 3
Emmanuel Bryan 1906285996
Gerald Oktavianus Hugo 1906358253
Jocelyn Gwenfil 1906358285
Felisita 1906358474
Zafirah Windi Annisa 1906389220
Problem 14.8
Parktown Medical Center, Inc., is a small health care provider owned by a publicly held corporation. It
employs 7 salaried physicians, 10 nurses, 3 support staff, and 3 clerical workers. The clerical workers
perform such tasks as reception, correspondence, cash receipts, billing, and appointment scheduling. All
are adequately bonded.
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, 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 break 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 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.
1
Identify internal controls that
have been in place and explain
the purpose of those controls
Internal Controls Purpose
Documentation or record for cash and checks received by
1 Pre-numbered receipt for each patient
Porktown, allowing Porktown to track their transaction
2 Patient’s bill collection Summarize revenue and update the A/R ledger
3 Daily stamp for opened mails Review and authentic authorization for checks
4 Supervision by the office manager Ensure the clerks perform their job correctly
Reduce the occurrence of errors or fraud by ensuring that no
5 Segregation of duties employee has the ability to simultaneously perpetrate and
hide errors or fraud in the usual course of their activities.
Ensures that all transactions that have passed through the
6 Bank Statements Reconciliation
bank statements have been reviewed and confirmed.
2
Identify weaknesses in the current
procedure and give recommendation
for improvement
Weakness Problem Solution
Held an external credit check before
Credit is approved by doctor only, The credit sales may not be
1 approval of credit in order to ensure
based on the interview collectible
that receivables will be collectible
Separate duties between the
Approval of credit and write-off The doctor may overstate or
employee which performs medical
2 done by the doctor, which understate the amount of
examination, credit approval, and
performs medical examination receivables or bad debt
write-off approval
Bank reconciliation and bank Bank reconciliation may be Separate duties between the
3 deposits are done by the same manipulated and bank balance employee which charges of bank
employee. may be overstated or understated reconciliation and bank deposits
Weakness Problem Solution
The accounts receivable
To guarantee that the balances are
subsidiary ledger (based on the
Overstatement or understatement compatible, reconciliation between
clerk's patient bill) and the
4 of receivables and bad debt the accounts receivable subsidiary
general ledger (based on the
accounts. ledger and the general ledger
clerks' summaries) are not
should be performed
reconciled.
Clerks take turns preparing and Mismanagement causes The current monthly statement
5 mailing monthly statements to overstatement or understatement balance is reconciled to the prior
patients who owe money of bad debt accounts monthly statement balances
The clerk who opened the mail The clerk can manipulate the The company should segregate the
about cash receipts also handles patient account receivables account clerk for cash receipts handling and
6
the patient account receivable by omitting some cash receipts the clerk for updating patient's
accounts. (cash theft) accounts receivables
Thank you!
