CASE 3.1

THE TROLLEY DODGERS

Synopsis

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.

Instructional Objectives

1. To identify key internal control issues for an organizations payroll function.

2. To identify audit procedures that may result in the discovery of fraudulent payroll schemes.

3. To emphasize the need for auditors and client management to exhibit some degree of skepticism regarding the motives and integrity of even the most trusted client employees.

The Trolley DodgersKey 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.

According the brief case, make a discussion from the key facts.