Trolley Dodgers Case
CASE STUDY: THE TROLLEY DODGERS
1. Identify the key audit objectives for a client’s 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 client’s payroll function in this Trolley Dodgers Case are:
i. Occurrence ii. Completeness iii. Accuracy iv. Posting & Summarization
v. Classification vi. Timing
i. Key Audit Objective : Occurrence
Dodgers must recorded payroll payments for existing employees only and should have separation of duties for each task.
Test of Control: Examine internal control to see if the payroll payments are for exiting work and existing employees. The test could be examining all the workers time cards, personnel files and review organization chart. They also can discuss with employees and observe duties being performed. The tests would examine printouts of transactions rejected by the computer as having nonexistent employee numbers.
Substantive Test of Transactions: The test to see if the right dollar amount in the payrolls were recorded and paid properly. They also test to review large dollar amount in the journal entries, general ledger and payroll earnings. Examine cancelled checks for proper endorsement could be compare with a personnel record.
ii. Key Audit Objective : Completeness
Dodgers must record all existent payroll transactions.
Test of Control: The test is to see if the existing payrolls are recorded. If employees do not get any payment, so they can directly report to the employer. They also test to review the renumbered payroll check to find the missing one.
Substantive Test of Transaction: They can compare the book and payroll bank statement. Therefore, they will prove the bank reconciliation and can look for unmatched dollars amount.
iii. Key Audit Objective : Accuracy
Dodgers recorded payroll transactions are for the amount of time actually worked and
1. Identify the key audit objectives for a client’s 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 client’s payroll function in this Trolley Dodgers Case are:
i. Occurrence ii. Completeness iii. Accuracy iv. Posting & Summarization
v. Classification vi. Timing
i. Key Audit Objective : Occurrence
Dodgers must recorded payroll payments for existing employees only and should have separation of duties for each task.
Test of Control: Examine internal control to see if the payroll payments are for exiting work and existing employees. The test could be examining all the workers time cards, personnel files and review organization chart. They also can discuss with employees and observe duties being performed. The tests would examine printouts of transactions rejected by the computer as having nonexistent employee numbers.
Substantive Test of Transactions: The test to see if the right dollar amount in the payrolls were recorded and paid properly. They also test to review large dollar amount in the journal entries, general ledger and payroll earnings. Examine cancelled checks for proper endorsement could be compare with a personnel record.
ii. Key Audit Objective : Completeness
Dodgers must record all existent payroll transactions.
Test of Control: The test is to see if the existing payrolls are recorded. If employees do not get any payment, so they can directly report to the employer. They also test to review the renumbered payroll check to find the missing one.
Substantive Test of Transaction: They can compare the book and payroll bank statement. Therefore, they will prove the bank reconciliation and can look for unmatched dollars amount.
iii. Key Audit Objective : Accuracy
Dodgers recorded payroll transactions are for the amount of time actually worked and