Case reflection
Question one
Payroll is among the biggest expense that a business incurs, hence auditing is imperative to ascertain that the figures in the financial statements are true and fair and reflect the financial position of an entity. Test of control as well as substantive audit procedure are crucial in detecting misstatements and frauds in the payroll system. Concerning Dodgers, there are various key audit objectives that were not considered. These include occurrence and existence, completeness, accuracy and presentation and disclosure. In occurrence and existence, audits aim to ascertain whether actual payments occurred and whether it was paid to genuine employees. These controls require proper segregation of duties to ensure that cases of fictitious employees are avoided. In completeness, verifications of payrolls are imperative to ascertain whether salaries, overtimes and bonus were paid as required. In accuracy, there is need to ascertain that the figures are computed correctly and payrolls should be presented and disclosed in income statements of the organization.
Question two
Internal weakness evident in the Dodgers payroll system includes lack of supervision and auditing on the payroll systems. Campos was the only individual who prepared the payrolls and therefore, nobody else knew what was happening. This created an opportunity for him to include fictitious employees in the payroll. Other weaknesses include poor accounting systems as the payroll expenses were not presented in the income statements.
Question three
The audit procedures that might have led to this discovery were the reconciliation of bank statements and cash, which indicated mismatch. This may have triggered the management of the Dodgers to question on the authenticity of the accounting procedures used. This triggered inquiry in the payroll system, which helped to reveal the fraud. The taking of the office by the controller who reconciled the accounts helped to reveal these frauds.
Work Cited
Case Study. The Trolley Dodgers
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