In this brief case, a long-time and trusted employee of the Los Angeles Dodgers engaged in a large scale payroll fraud to embezzle funds from the organization. Over a period of several years, this fraudulent scheme cost the owners of the Dodgers several hundred thousand dollars. Contributing to the success of the fraud was the laxity of the Dodgers’ internal controls. Eventually, the fraud was exposed when the individual who masterminded the scheme was hospitalized on an emergency basis and thus unable to “cover his tracks” for a period of time.
132 Case 3.1 The Trolley Dodgers
The Trolley Dodgers—Key Facts
1. The top executives of the Dodgers organization apparently placed a great deal of trust in their subordinates.
2. Campos, the Dodgers’ operations payroll chief, was a respected and trusted member of the Dodgers organization.
3. The Dodgers’ payroll system was not only supervised by Campos but had also been designed by him.
4. Campos was involved in such menial tasks in the payroll function as preparing employees’ weekly payroll cards.
5. Campos would return to oversee the preparation of the Dodgers’ payroll even when he was on vacation.
Case 3.1 The Trolley
Suggestions for Use
This case deals exclusively with an organization’s payroll function and thus would articulate well with classroom coverage of the payroll transaction cycle. Alternatively, the case could be used to introduce students to key internal control concepts including the following: the need for management to resist placing too much trust or reliance on any one employee, the need for periodic rotation of accounting responsibilities and/or mandatory annual vacations for all accounting employees, and the old truism that an internal control system is only as good as the people operating it (or is only as reliable as the least reliable person within it). Suggested Solutions to Case Questions
1. An auditor‘s principal objective in performing tests of controls on a...
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