Trolley Dodgers Case

Executive Summary The trolley slybootss was exposed that it had essential guard problems existed. The some other hand, ready that employees embezzlement. The depression blow up of this report advert and explain the characteristics of employee parody indicated in Dodgers fictional character. such as perpetrator must(prenominal)iness gains the assumption or confidence of the individual or company universe defrauded. etc And consequently, the hour part is explain the innate reign over weaknesses and brain cozy rule objectives . The third part base on the pinch of the mission of Sponsoring Organisations subjective project.Final part is recommendation for Dodgers inborn determine problems. hedge of Contents cosmos3 Characteristics of the employee fraud in streetcar Dodgers consequence3 The internal avow weaknesses in the Dodgers manufactureroll part discussion section system4 The critical evaluation of the internal regard problems in the Dodgers paysheet system5 Recommendation for Dodgers internal train problems7 Reference List9 Introduction In this report, I will be divided into four parts. The first part will cover Identify and explain the characteristics of employee fraud .The second part is explain the internal fake weaknesses that were evident in the Dodger paysheet department system . the internal get word weaknesses include no mugwump fall over and Dodgers dont earn insularity of duties, etc. The third part is to understanding the delegacy of Sponsoring Organisations internal avow frame roleplay to evaluate internal declare problems. The COSOs internal control frame race surrender vanadium interrelated components. the five components includes Control environment ,Control activities, Risk judgment , Information and communicating and Monitoring.The last-place part is recommendation for Dodgers internal control problems. Characteristics of the employee fraud in Trolley Dodgers case Employee fraud is an e mployee within the company to improperly deceptive gist to obtain the companys money or other property. Through understand to Romney and Steinbart for the employee fraud has a good turn of important characteristics. However, the analysis and interpretation in this case related to employee fraud Characteristics. One basic characteristics of employee fraud is perpetrator must gains the trust or confidence of the person or company cosmos defrauded.In the case mentioned Edward Campos is trading operations payroll Chief. He is longtime functional for the Dodgers . He was go to sleepn not wholly for his work ethic merely in any case for his loyalty to the club . However, His boss theorize Campos was on spend ,He will came hold to company and did the payroll. Dodgers Trusted him. The facts switch proved that perpetrators has gained the trust of the company , His behavior is consistent with employee fraud of characteristics . Many employee fraud cases ar the characteristics of perpetrators and employers to wee-wee a good relationship of trust. other(a) case round Bess is smash supervisor at the campus student health services(SHS)? she is trusted employee? she was up to(p) to commit this fraud undetected for nearly 13 years? why? But the answer is simply Because dont anyone suspected the SHS cashier supervisor because she was a trusted, well-liked employee. Fraud research keeps that most members of the general national fit the pro load of the typical fraud perpetrator(Peterson and Gibson 2003). But Dodgers case and Bess case similar, so to meet this characteristics of employee fraud.The fraud perpetrators use false or misleading randomness to obtain asset or money is the sound elements of employee fraud. This element is required no use other violent offenders, Other employee fraud is they the hide their tracks by garble tapes or other knowledge (Romney and Steinbart 2009). Because he false hire income of workers, He registered ab surface $ 200 0 weekly wage employees. However, the real wages of workers earning $ 7 per hour. His salary more than 55% false.On the other hand, He completely controlled the payroll system for filling knocked out(p) the weekly payroll cards for the employees of the Dodgers. Because, He stick outed and implemented to payroll and only himself understand full payroll system. Other case admitted to manipulating work samples, falsifying expresss to cover up its poor performance as a Medic ar contractor(Healthcargon pecuniary Management 1998) . Demonstrate through their privileged position to falsifying records is general public fit the pro bill of the characteristics fraud perpetratorThe internal control weaknesses in the Dodgers payroll system Internal control refers the abet implement by the corporate board of directors, managers and other staff, and provide sensitive assurance . The purpose of internal control is to discipline the reliability and truth of pecuniary reporting, efficienc y of operations, and compliance with laws and regulations. The internal control weakness in the Dodgers payroll system include 1. The Trolley Dodgers dont halt separatist check and performance .Because, Campos controlled the system so completely that he person whollyy filled out the weekly payroll cards for each(prenominal) of the 400 employees of the Dodgers. 2. Trolley Dodgers should sop up must vacation for senior managers. Because, A management position working in a long time, then he will be more familiar with the internal control vulnerabilities, the possible implementation corruption. 3. The Dodgers dont have separation of duties, Campos is operations payroll chief. He marked and implemented of a new payroll system,.However, this is only himself understanding of all system operations. He was the trusted employee who got trusted too much, However,that Campos took profit of his potence. He came back during vacation to do the payroll. On the other hand, Camps routinely in flated the number of hours worked by several employees and then split the resulting overpayments level(p) with those individuals. These employees pay $ 7 per hour, simply these employees weekly wage approaching $2000. He did not ensure the integrity of assets and reliability of pecuniary reporting.This information is excessively proved that the internal control failed to arrived goal of the segregation of duties. Enterprises to integrity and lace the internal shaping, it is the economic activity of firms for planning, directing and controlling the organizational undercoat, the shopping mall problem is a reasonable segregation of duties. Under normal circumstances, exploit with each business or the economy in the whole exploit a few important aspects, Companies need to be up to the deuce departments or both or more departments, two or more staff for the purpose of mutual control.The critical evaluation of the internal control problems in the Dodgers payroll system What is internal control ? Different plenty have different interpretations. General people to understand the internal control for the organization to reduce work of the decision-making errors and defects in the implementation of the control, These controls may be internal oversight, it may be management manuals, rules and regulations. These theories are not wrong, but not comprehensive. In accordance with the internal control conjecture, these are only part of the internal control, but not all.Internal control theory suggests that internal control is a systematic framework, It is built on the basis of jeopardy management. The five elements include Control environment ,Control activities, Risk assessment , Information and communication and Monitoring . (Romney and Steinbart 2009). We call this architecture as citizens committee of Sponsoring Organisations (COSO) internal control framework. The internal control integrated framework has been widely adopted as the principal way to evalua te internal controls. volition through the five elements to evaluate the internal control problems with the Dodgers payroll system.The control environment is the assurement, Strengthen or weaken the specific policies, procedures and their impact on the efficiency of the various factors, mainly refers to the major factor. Control environment have a direct impact on the implementation of internal control and execution of business objectives and related to the overall strategic objectives. Control environment, including the value of employees, violence competence, managements business model, the allocation of rights and responsibilities. In this case have found problem is Trolley Dodgers no reasonable structure and clear naval division of responsibility approach.Because, Campos is payroll chief. However, Campos completely controlled the payroll system for filling out the weekly payroll cards for the employees of the Dodgers. Therefore, the formation of a single department, resulti ng in no mutual constraints of the internal control system. The control activates is Instruction is to help executive management policies and procedures. It throughout the organization, at all levels and functions, including a bod of activities such as approvals, authorizations, confirmed that adjustment, business performance evaluation, asset certificate and separation of duties.The Trolley Dodgers dont have separation of duties, However,that Campos took advantage of his authorization. He came back during vacation to do the payroll. Risk assessment is to identify and analyze the shape of achieving goals related risks, which with the economy, industry, regulatory and operating conditions are constantly changing, the need to establish a mechanism to identify and deal with the corresponding risks. Dodgers case bathnot be any problem in this regard. Information and communication is surrounding the control activities are information and communication.From internal and external infor mation must be a certain format and time breakup to confirm the capture and transfer to ensure the companys employees to perform their respective duties. legal communication is a broad communication, including the enterprise from top to bottom, bottom-up and naiant communication. Effective communication includes the relevant information with parties outside the enterprise strong communication and exchange, such as customers, suppliers, administration and shareholders.Dodgers does not have really good communication, so senior managers do not understand the financial statements of a problem. Monitoring is the entire business process must be monitored. Through the normal management and control activities and staff activities in the communication channel of his duties to monitor, to evaluate the quality of operation of the system. Evaluation of different steps depending on the scope and implementation of risk assessment and monitoring program effectiveness. By understanding the Do dgers case brush aside determine a great part of this monitoring problem.Dodgers not have normal company monitoring department. evanesce to administrator throw outt find employee fraud. Recommendation for Dodgers internal control problems Based on understanding of the COSO internal control framework and the Dodgers facts, I recommend Dodgers to strengthen its internal control system. Internal controls perform trio important point, segregation of duties , strengthen the monitoring and Must ensure that the lineing system documents and accounting records of the completeness and correctness.All of those three are suitable for Dodgers situation. Three proposals are as follows 1. When these functions are combined in one individual, it is possible to the misappropriation asset and conceal the crime by manipulating the related records ? such as overpayment 55% with those employee. So, When the economic activity of firms for planning, directing and controlling the organizational basis, the nubble problem is a reasonable segregation of duties.Under normal circumstances, dealing with the whole process of business of each economy, Must two department or more than two departments, two or more two employees take responsibility, its purpose is to restrict each other. Therefore, Separating the incompatible functions of cash record and cash custody, independent check of cash received and cash deposited, The needed vacations with other personnel performing duties during the employees absence. 2. Dodgers need to strengthen monitoring. However, it is necessary to establish an internal audit department.Internal audit is to strengthen the internal control system is a basic measure. Internal audit responsibilities include the critical review of accounts, It also includes inspection, evaluation of internal control system is perfect. Through the companys financial report of audit. The audit report submitted to the Board of Directors. Thus ensuring the companys internal contr ol system more perfect. 3. Must ensure that the accounting documents and accounting records of the completeness and correctness. Because in this case found that the perpetrators falsified accounting documents.Conclusion Through the analysis of the Trolley Dodgers case, we found internal control have weakness It dont have separation of duties and dont have independent check and performance. Also, Dodgers had internal control issues according to the Committee of Sponsoring Organisations (COSO) internal control framework . Analysis of the case of internal control, and ultimately gives three suggestions. Recommendations include segregation of duties , strengthen the monitoring and Must ensure that the accounting documents and accounting records of the completeness and correctness.Reference List Book references Romney, MB & Steinbart, PJ 2009, accounting system information systems, 11th edn, Pearson Prentice Hall, Upper Saddle River. Academic ledger articles references Bonita K Peters on and Thomas H Gibson. Student health services a case of employee fraud In Journal of Accounting Education 2003 21(1)61-73 HFM (Healthcare Financial Management) Illinois Medicare carrier guilty of fraud, agrees to a $144 million settlement. September 98, Vol. 52 Issue 9, p10, 1/4p LIN LINTrolley Dodgers CaseCASE STUDY THE cable tramway DODGERS 1. Identify the key audit objectives for a thickenings 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 clients payroll function in this Trolley Dodgers Case are i. Occurrence ii. Completeness iii. Accuracy iv. Posting & Summarization v. Classification vi. Timing i. tell apart Audit Objective Occurrence Dodgers must put down payroll payments for animate employees only and should have separation of duties for each task. running game of Control encounter internal control to down if the payroll payments are for exiting work and actual employees. The test could be examining all the workers time cards, personnel files and review organization chart. They also sewer discuss with employees and observe duties being performed. The tests would quiz printouts of transactions rejected by the computer as having non subsisting employee numbers. Substantive running game of Transactions The test to square up if the right long horse mark amount in the payrolls were put down and paid properly.They also test to review large dollar amount in the journal entries, general ledger and payroll earnings. hit the accommodates call off checks for proper stock warrant could be contrast with a personnel record. ii. paint Audit Objective Completeness Dodgers must record all existent payroll transactions. rill of Control The test is to see if the existing payrolls are recorded. If employees do not get any payment, so they can without delay report to the employer. They also test to revi ew the renumbered payroll check to find the missing one. Substantive show of Transaction They can differentiate the book and payroll bank statement.Therefore, they will prove the bank reconciliation and can look for unmatched dollars amount. iii. attain Audit Objective Accuracy Dodgers recorded payroll transactions are for the amount of time actually worked and at the proper pay judge accuracy. Test of Control The test is to see if the right hours and right rate are recorded and tax keep back is correct. Batch totals are equald with computer summary reports. Auditors could examine authorization in payroll records and personnel files. Substantive Tests of Transaction To test for exact dollar amount, listeners could recalculate gross and net pay.They also can compare pay rate with the industry, review cancel check withholdings by referring to tax tables and authorization forms in personnel file. iv. Key Audit Objective Posting and Summarization. Dodgers recorded payroll trans action properly included in the master file also properly summarized. Test of Control When payroll master file totals are compared with general ledger totals, auditors should examine initialed summary total reports indicating that analogy has been made. They also must examine indication of internal verification.Substantive Test of Transaction Test clerical accuracy by footing the payroll journal and tracing postings to the journal ledger and the payroll master files. v. Key Audit Objective Classification Dodgers classify all payroll transaction properly and efficiently. Test of Control They should review charts of accounts. If the account classifications are internally verified, then they can examine indication of internal verification. Substantive Test of Transaction They can review time cards and job ticket, and delineate through to labor distribution.They should compare classification with chart of accounts or procedures manual. vi. Key Audit Objective Timing Dodger must reco rd all payroll transaction immediately, on the correct date and right amount. Test of Control Auditors should examine procedures manual and observe when recording takes place and examine indication of internal verification. Substantive Test of Transaction The auditor compare date on checks with date in the payroll journal and compare date on check with date the check cleared the bank. 2. What internal control weaknesses were evident in the Dodgers payroll system?Internal control is a process, affected by an entitys board of director, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in reliability of financial reporting, effectiveness and efficiency of operations and compliance with laws and regulations. Internal control weakness in the Dodgers Payroll System are from the design of internal control, no independent check and performance, no separation of duties, the weakness of work environment, and required vacation for senior manager. . Design of internal control Campos, the operations payroll chief have designed the internal control by himself and implemented a new payroll system that only can be fully understand by him. As we know, the purpose of design the internal control is to prevent or detect material misstatement in the financial statement. Due to this case, Campos can easily commit fraud because at that place are no other people that can understand the design of the internal control. ii. No independent check and performanceCampos controlled the system so completely that he personally filled out the weekly payroll card for each of the four hundred employees. He can record any fraudulent statement because there is no evidence that shows whether the record is reliable or not. iii. No separation of duties Campos took advantage of his authorization because he was the trusted employee who got trusted too much from Dodges. When he was on vacation, he came back and did the payroll. There is no s eparation of the custody of assets from accounting. 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 each 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 regular with those individuals.In addition to this, Campos also embezzle several hundred universal gravitational constant dollars from his employer. 3. Identify audit procedure that might have led to the husking of the fraudulent scheme mastermind by Campos. Audit procedure is the detail 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 clear the turn tail chart Auditor should go through the Dodgers payroll flow chart. The auditor must understand clearly the flow chart. From that, the auditor can travel along 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 by Campos only. ii. The auditor can interview employees in payroll department. The auditor can interview employees in payroll department. The auditor can ask whatever question that they think its very important and need to know. Like, how much Campos pay for quotidian operations works for every level of staff, and how Campos manage the time card. The auditor will know more detailed about the payroll process. ii. The auditor test for nonexistent employees For confuse sure the all transaction that have recorded by Campos and payroll department is really exist and they reconcile payment to the non fictitious employees, the auditor compare names on cancelled checks with the time card have created. The auditor can scan the endorsement on cancelled checks. Furthermore, auditor also can make par on personal files of employees with time card that created. Other than that, the auditor can run test of control by giveed transaction in the payroll with Human Resources department.The auditor can select a week check transaction and examine the first fifty checks, select the fifty checks with the largest amounts, select the checks randomly or select those checks the auditor thinks are most belike to be in error or a combination of this system could be used. Besides that, the auditor request surprise payroll proceeds from payroll department. When the auditor requests for payroll payoff suddenly, for sure the payroll department do not chance and do not have tolerable time to make correction on their system. So, Auditor will see the real transaction that have make by that department. Finally, the uditor can come after the misstatement, fraud and error easily. iv. The auditor tests for fraudulent hours Other than that, the auditor also can reconcile the total hours paid in the payroll records with and independent record of hours worked. Auditor would see, if payroll record transaction is true based on the time card or not. The auditor can trace if the record keeping employees have intention to do that fraud. v. The auditor compare pay rates with the same positions in other baseball squad in the league. The auditor also should understand business nature and make comparison with another similar business nature.From that result, the auditor will know how much is exactly pay rates usually paid to the sea captain baseball. After done that activity, the auditor is able to identify the pay rates that put by Campos to the every l evel worker is it relevance or not. vi. The auditor examines the large payroll checks. Last steps, that auditor use to mention the fraud is by examine the largest payroll checks out. The auditor reconciles the checks between the payroll record, time card, and all relevance data. Auditor would see which one fictitious transaction that has been made by Campos.