Trolley Dodgers Case Study

As you are aware, my team and I have been auditing the payroll functions of The Trolley Dodgers. During our audit, we were introduced to Edward Campos, the payroll chief of the organization. Mr. Campos has been with the Dodgers organization for many years, beginning in an entry-level accounting position. I was told personally that Mr. Campos is a seemingly perfect example of an expert within the organization. He designed and implemented the payroll system, part of the overall payroll function audit we are undertaking. I bring Mr. Campos to your attention due to recent fraudulent activities that we have discovered though the audit that trace back to him. You will recall that my team was called upon to conduct the audit after the controller

Campos was known for his work ethic and loyalty, he was in complete control of the payroll process. He had so much control that he personally filled out the weekly payroll cards for each of the 400 employees in the organization. He even came in to complete payroll when he was on vacation. However, it has become evident through our audit procedures, that the previously mentioned payroll system was only fully understood by Mr. Campos and because of this, he added fictitious employees and overinflated the payroll of several employees, while splitting the extra money with the involved employees.

An Engagement Letter was submitted to the Board of the Trolley Dodgers indicating that the scope of the audit would be the organization’s payroll functions. Specifically mentioned were the responsibilities of my audit team to identify. I had previously prepared the audit plan with the audit procedures. This is a list of those audit procedures:

1. Inspection of source payroll records and

A relatively simple analytical procedure that could have been in place was a comparison of the actual payroll to the budget. Another procedure that could have prevented the fraud is using estimates of payroll based on the number of games during the pay period and the number of staff needed and comparing that short-term estimate to test how close the estimate came to actual payroll. If those comparisons were not close to actuals, then, in a separation of duties, another person or department should have looked at the time cards for comparison. Payroll registers should have been printed, approved, and retained. These are all examples of control and substantive tests which were not being