Difference between accrual and cash bases of accounting
The following case was reported by fraud magazine. Read it and answer questions 1 and 2.
“Doctor accused of misdiagnosing patients.
In May, authorities indicted Dr. Smith, who operated several clinics in Florida, in connection with more than $200 million in health care claims that were based in part on fraudulent statements and resulted in $50 million paid to the doctor. According to the U.S. Department of Justice, Smith falsely diagnosed patients — including children, the elderly, and those with disabilities — with serious and even terminal illnesses in order to prescribe expensive treatments and medication, including chemotherapy in some cases. The scheme allegedly allowed the doctor to live a lavish lifestyle, complete with his own personal jet, a fleet of luxury cars and numerous expensive commercial and residential properties in Mexico and the U.S.”
1. Which of the different types of corruption schemes is relevant here? (Explain your answer)
2. Describe this fraud can be prevented and detected (one of each).
3. Describe how abuse at the submission phase of the bidding process can be prevented and detected. (One of each).
4. Describe the difference between accrual and cash bases of accounting. Also, provide an example of each
5. Describe one way that an organization using the accrual basis of accounting, can determine whether fraud is occurring.
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