Tramy Nguyen Audit Case: The Trolley Dodgers. 1.

Key audit objectives for clients payroll function: Key Audit Objectives Occurrence Test of Control Examine internal control to see if the payroll payments are for exiting work and existing employees. The test could be: examining timecards, personnel files; reviewing organization chart. Test to see if the existing payrolls are recorded. Employees will report if they dont get paid. Review the renumbered payroll checks to find the missing one. Examining if the right hours and right rate are recorded, tax withholding is correct. Auditors could examine authorization in payroll records, personnel files. If payroll master file totals are compared with general ledger totals, auditors should examine initialed summary total reports indicating that comparison has been made. Review charts of accounts. If account classifications are internally verified, examine indication of internal verification. To test for timing, auditors should examine procedures manual and observe when recording takes place. Substantive Tests of Transaction Test to see if the right dollar amounts in the payrolls were recorded and paid. Review large dollar amount in the journal entries, general ledgers. Examine cancel checks. Compare the book and the payroll bank statement, and look for unmatched dollars amount.

Completeness

Accuracy

Posting and Summarization

To test for exact dollar amount, auditors could recalculate gross pay, net pay. Compare pay rate with the industry. Review cancel checks and compare to the book. Footing the payroll journal. Tracing postings to the journal ledger and the payroll master files

Classification

Review time cards and job ticket, and trace through to labor distribution.

Timing

Compare date on checks with date in the payroll journal.

2. Internal Control weakness in the Dodgers payroll system: -Campos, the operations payroll chief, self designed and implemented a new payroll system that only him could fully understand. - No independent check and performance: Campos filed weekly payrolls card for four hundred employees. - No separation of duties: Campos was the trusted employee who got trusted too much, so that he took advantage of his authorization. He came back during vacation to do the payroll. - Dodgers work environment would be a weakness. Both Campos and his cohorts have low work ethic. - Dodgers should have required vacation for senior managers. 3. Audit procedures that might discover the fraud: - Understand Dodgers payroll flow chart. Auditors would see there are no independent check and performance and no separation of duties. - Interview employees in the payroll department. -Test for nonexistent employees compare names on cancelled checks with time cards; scan endorsements on canceled checks; trace selected transaction in the payroll with the HR department; request surprise payroll payoff. -Tests for fraudulent hours reconcile the total hours paid in payroll records with an independent record of the hour worked; observe employee clock in . -Compare pay rates with the same positions in other baseball team in the league. -Examine the large payroll checks.