Case Of The Trolley Dodgers In 1890: The Brooklyn Trolley Do

Casethe Trolley Dodgersin 1890 The Brooklyn Trolley Dodgers Professio

In 1890, the Brooklyn Trolley Dodgers professional baseball team joined the National League. Over the following years, the Dodgers faced significant challenges competing with other New York City teams, notably the New York Yankees, which were better financed and had higher-caliber players. In 1958, after nearly seventy years of struggle, the Dodgers relocated to Los Angeles, an opportunity presented by owner Walter O’Malley, who aimed to expand and increase profitability. Los Angeles County purchased land in Chavez Ravine and gifted it to O’Malley for the construction of a new stadium. Since relocating, the Dodgers became a highly successful franchise, known for effective management and profitability, especially during the 1980s when profits approached 25 percent pre-tax margin. In 1997, Peter O’Malley, Walter’s son, sold the franchise to Rupert Murdoch for $350 million. Murdoch’s representatives praised the organization’s management and standards set by the O’Malley family.

Peter O’Malley attributed organizational success to the expertise of retained professionals across functional areas, exemplified by Edward Campos, a longtime accountant and payroll chief. Campos, who progressed through the organization over two decades, designed a payroll system that he alone fully understood. His control over the system was so complete that he personally filled out payroll cards for 400 employees. Campos was known for his work ethic and loyalty—returning from vacation to process payroll. However, this trust was misplaced, as Campos embezzled hundreds of thousands of dollars over several years by adding fictitious employees and inflating hours worked, then splitting the overpayments with employees involved. This scheme unraveled when Campos was hospitalized, and the payroll irregularities were discovered by the Dodgers’ controller, leading to criminal charges, convictions, and restitution orders.

Paper For Above instruction

The case of the Dodger payroll fraud highlights essential aspects of internal control effectiveness, audit procedures, and fraud detection strategies within large organizations. Understanding the key audit objectives for payroll functions requires a comprehensive analysis of control-related and substantive procedures, as well as identification of weaknesses that facilitate fraud, such as that committed by Edward Campos.

Key audit objectives in a payroll function encompass verifying the existence, completeness, accuracy, and validity of payroll transactions and employee records (Arens, Elder, & Beasley, 2017). Controls should ensure that all employees are authorized and legitimately on the payroll and that payments reflect actual hours worked at agreed rates. The audit tests of controls should include evaluating segregation of duties, reviewing access restrictions to payroll systems, and assessing authorization procedures for payroll changes (Whittington & Pany, 2019). Substantive procedures, on the other hand, focus on confirming the accuracy and completeness of payroll data, including vouching transactions to supporting documentation, recalculating wages, and performing analytical procedures to identify anomalies (Alleyne, 2013).

In the Dodgers’ case, evident internal control weaknesses included excessive reliance on a single individual—Campos—who controlled the payroll system without adequate oversight. The lack of segregation of duties allowed Campos to manipulate payroll records with ease. There was also an absence of regular independent reconciliations and review procedures that could have detected irregularities earlier. Moreover, the payroll system’s design permitted Campos to input fictitious employees and alter hours without supervisory checks, indicating ineffective controls over payroll adjustments and system access.

To improve fraud detection, auditors might have employed procedures such as performing detailed analytical reviews comparing payroll expenses over time, examining unusual fluctuations in employee counts or pay rates, and scrutinizing payroll transactions against official employee records (Crank & Guillet, 2019). Sampling and testing employee existence through interviews or physical verification, along with high-level review of payroll system access logs, could have uncovered irregularities sooner (Kaplan & Atkinson, 2015). For example, audit procedures such as a surprise payroll audit, follow-up on unusual pay rates, and reviewing entries made during Campos’s tenure could have flagged the fictitious employees and inflated hours, thereby preventing or early detecting the fraud.

Overall, the Dodgers payroll case underscores the importance of robust internal control environments, regular independent reviews, and comprehensive substantive testing in mitigating fraud risk and enhancing audit quality. Organizations must ensure controls over access, authorization, and independent review are effectively established and maintained to prevent similar fraud schemes in the future (Singleton, Straits, & Straits, 2012).

References

• Arens, A. A., Elder, R. J., & Beasley, M. S. (2017). Auditing and Assurance Services: An Integrated Approach. Pearson.
• Alleyne, P. (2013). Auditing and Assurance Services. Pearson Education.
• Crank, R., & Guillet, B. D. (2019). Auditing: A Risk-Based Approach. Cengage Learning.
• Kaplan, R. S., & Atkinson, A. A. (2015). Advanced Management Accounting. Pearson.
• Whittington, R., & Pany, K. (2019). Principles of Auditing and Other Assurance Services. McGraw-Hill Education.
• Singleton, T., Straits, W., & Straits, M. (2012). Auditing: A Risk-Based Approach. McGraw-Hill Education.