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ACCTG456 (12)

Chapter 3 In Class Questions_solution.pdf

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Trish Stringer

In Class #3.1 – Fraud risk CBA Chartered Accountants is a successful mid-tier accounting firm with a large range of clients across Canada. During 2011, CBA gained a new client, Health Care Group (HCG), which owns 100 percent of the following entities:  River Valley Centre, a private treatment centre  Gardens Nursing Ltd., a private nursing centre  Laser Care Limited, a private clinic that specializes in laser treatment of skin defects. th The year end for all HCG entities is June 30 . The audit partner for the audit of HCG, Tania Clark, has discovered that two (2) months before the end of the financial year, one (1) of the senior nursing staff at Gardens Nursing Ltd. was dismissed. Her employment was terminated after it was discovered that she had worked in collusion with a number of clients/patients to reduce their fees. The nurse would then take secret payments from the patients. The employee/nurase had access to the patient database. While she was only supposed to update room-located changes for patients, she was able to reduce the patient period of stay and the value of other services provided. The fraud was detected by a fellow employee who overheard the nurse discussing the “scam” with a patient. The employee reported the matter to Gardens Nursing Ltd.’s General Manager. Required 1: Which accounts on the balance sheet and income statement are potentially affected by the fraud? The collusion resulted in reduced fees for patients. This means that revenue is understated for various medical and other services as well as room charges
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