Essay About Key Audit Objectives And Walter Omalley

The Trolley Dodgers
Essay Preview: The Trolley Dodgers
Report this essay
Case 3.1: The Trolley Dodgers
Summary:
The Brooklyn Trolley Dodgers is a professional baseball team originally from the New York
City area. Due to lack of players of high caliber and finance, the team moved to Los Angeles seven
decades later. Walter OMalley, owner of the Dodgers, saw an opportunity to make the team more
profitable. The team found success during the 1980s and 1990s, becoming the most profitable
franchise in baseball. In 1997, the franchise was sold to Rupert Murdoch, a media mogul. When
Walter OMalley son, Peter, was managing the Dodgers, he employed Edward Campos as the
operations payroll chief. Campos implemented a new payroll system that only he fully understood.
He was trusted by everyone in the franchise, but in reality Campos had been embezzling from his
employer by adding fictitious employees to the system, inflating the hours worked by employees
and splitting the overpayments with those individuals. The scheme was only discovered when
Camposs position was temporarily replaced by the controller when Campos was ill. Campos was
sentenced eight years in prison and owed restitution of $132,000 to the Dodgers, and cohorts were
also put in prison placed on probation.
Professional Literature:
Auditing Standard No. 5 and Sarbanes-Oxley says that independent auditors need to issue
an opinion on the managements assessment of the companys internal control. In this case, there
is a material weakness in the internal controls due to the lack of segregation of duties. Campos is in
charge of the whole payroll system and controls it entirely.
Questions:
1. The key audit objectives for a clients payroll function is to evaluate if the payroll account
balances are fairly stated in accordance with GAAP. Auditors would have to understand the
internal controls of of the companys payroll system and design and perform tests of controls and
transactions. The objectives related to tests of controls and substantive audit procedures include
obtaining evidence about the effectiveness