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Case 3.

1 The Trolley Dodgers

1. The key audit objectives are occurrence and existence, completeness, accuracy, posting & summarization, presentation and disclosure, timing and classification. Because completeness objectives means there is a need to check all of the amounts paid to employees when the big amounts involved in the payroll, so, for a clients payroll function, in this situation, completeness objectives should be considered. Auditors should level the control risk on all payroll transaction cycle, which is auditors major objective on performing tests of controls. In order to determine the nature, extent, and timing of the year-end substantive tests auditors need to assess control risk for a transaction cycle to get strong evidences. A payroll transaction cycle has two key accounts, which are accrued payrolls and payroll expenses. Auditors mainly consider about these two accounts if it violate the completeness objective for most expense and liability accounts. Then, auditors use comprehensive analytical procedures when assess periodic payroll expense to check its rationality. After checking the payroll expense and considering it with the recent average employee pay raise, auditors will develop an expectation. If the payroll expense provided by the clients out of the auditors expectation, then, a substantive procedures and are tests needed to further check those differences. 2. There are several internal control weaknesses in the Dodgers payroll system: There are not enough enforced vacations for key personnel showing in the case. In the payroll systems, the scope of control of one person is started with the individuals design and included the persons involvement in the operational detail of the system. A necessary test

may help to discover the fraudulent scheme. Auditors of the company did not enough periodic testing on the payroll transaction cycle. a. There are some examples of audit procedures that might led to the discovery of the fraudulent scheme masterminded by Campos: Manual or computer-based tests Employees who were paid for an excessive number of hours might be discovered by manual or computer-based tests. Proper distribution of payroll checks For selected department, a proper distribution of payroll checks may lead in unclaimed checks which help to discover fraud of Campos. Analytical procedures Several analytical procedures to check the Dodgers periodic payroll expense might have disclosed the payroll expenditures of the department were not conformity.

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