CASE STUDY: THE TROLLEY DODGERS

1. Identify the key audit objectives for a client’s payroll function. Comment on both objectives related to tests of control and those related to tests of control s and those related to substantive audit procedure.

The key audit objectives for client’s payroll function in this Trolley Dodgers Case are:
i. Occurrence ii. Completeness iii. Accuracy iv. Posting & Summarization
v. Classification vi. Timing

i. Key Audit Objective : Occurrence
Dodgers must recorded payroll payments for existing employees only and should have separation of duties for each task.

Test of Control: Examine internal control to see if the payroll payments are for exiting work and existing employees. The test could
A person who has temporary or permanent custody of an asset should not account for that asset. This is because by allowing one person to perform both function increases the risk of that person disposing of the asset for personal gain and adjusting the records to cover up the theft. As we can see in this case, Campos was the only one who responsible for every task.

iv. Weakness of the work environment
There is collusion between employees and management. This showed that both Campos and his cohort have low work ethic. Campos routinely inflated the number of hours worked by several employees and then split the resulting over payment fifty-fifty with those individuals. In addition to this, Campos also embezzle several hundred thousand dollars from his employer.

3. Identify audit procedure that might have led to the discovery of the fraudulent scheme mastermind by Campos.
Audit procedure is the detailed instruction for the collection of a type of audit evidence that is to be obtained at some time during the audit.

i. The auditor must understand clearly the flow chart
Auditor should go through the Dodger’s payroll flow chart. The auditor must understand clearly the flow chart. From that, the auditor can trace how the payroll system is going on actually. Then, the auditor would see there are no independent checks that have been done by Campos. The payroll department also does not have segregation of duties and all that work is done