Internal Control Project Paper

Introduction of Dentistar and the problem Dentistar, Inc. was formed in 1985 to provide dental and orthodontic services to subscribers of their prepaid dental plans. This report examines the western region’s office, located in Los Angeles, and its issuance of excessive manual checks that resulted in multiple bank overdrafts. Results indicate that only minimal efforts have been made for internal control measures in this office and companywide, and that weaknesses have allowed the Finance Coordinator to embezzle funds. There are many issues to be addressed, and several remedial actions to be taken to prevent these types of losses going forward.
Strengths in the internal control system Dentistar’s internal control system has some strengths, including its detection policies, limits on access to data, and the review of operational results. When implemented properly and consistently, these controls can help to ensure the soundness of the system long-term. In processing manual disbursements, the Director of Administration (Sally Trust) receives support documents and calculations for the amount of payment from the Finance Coordinator, and then checks for completeness and correct calculation before approving the transaction. Additionally, separate employees are responsible for preparing checks and for authorizing checks. This type of preparation and approval system is vital for internal control and fraud prevention. Furthermore, Dentistar restricts access to information such as the general ledger and non-maintenance customer information items. These features are accessible only to pertinent departments that can’t initiate transactions affecting the information within, creating difficulties in hiding unethical behavior and ensuring consistent reasoning and format. Finally, review of financial statements and bank records at the closing of a period can highlight areas with potential for misused funds, or the need to alter budgeting procedures. For Dentistar,