Hamilton Wong, In-Charge Accountant free essay sample

If I was in Hamilton Wong’s position, I think I would report all of the time I spent working on the Wille Lomas audit, even if it exceeded the budget. As an accountant, my ethical responsibility is to be honest and have integrity and by not reporting the actual amount of time I worked on the audit, I would be lying. I will be losing my honesty and integrity if I was not to report the actual amount of worked I did. I would first have to evaluate why it is that I am spending a large amount of time on that part of the audit; is it because I am not managing my time efficiently or because a situation arise with regards to the examination or the documents. I would then talk to my manager and let them know the reasons for which I will be going over the budget. The manager would be able to find a solution to not go too much over budget or he or she will be able to talk to the client about the situation. The second reason why I would report all of the time I spend working on the audit will be because if an inquiry was to arise, I would be able to demonstrate all the worked I did on the engagement. Documentation and paper trail is a big part of the audit, therefore it will be very important to keep proper tacking of who worked on what and how much time was spend working on the engagement. Although Lauren Hutchinson is not doing anything illegal, I do believe that she behaved unethically by underreporting the time she worked on the Willie Lomax engagement. Lauren is lying about the spent time working on the engagement and therefore is not been honest, which is a responsibility of an accountant and auditor. Lauren was lying to her managers and to the client. The manager will be under the perception that Lauren is more efficient than others, even to the point of going under budget, and will be more likely to give her the promotion. I see this as unethical because it is an unfair advantage over the other audit staff. Lauren will also be lying to client, who will misrepresent the efficiency of the audit. This could bring problems in the future when Lauren cannot â€Å"eat† so much time or when the audit staff is rotated. 2. Academic research suggests that underreported time on audit engagements is a common practice. What are the key objectives of tracking hours worked by individual accounts or assignments on audit engagements? What implications does the underreporting of time have for individual auditors, their colleagues, and the overall quality of independence audits? One of the key objectives of tracking the hours worked by individual accounts assignments on an audit is to have documentation to show the client why they are charging them what they are been billed and how much time was spent in their audit engagement. This way the client can clearly see that all the time reported and charged to them was actually worked in certain part of their engagement. Another objective of tracking hours is to show how much time was spent on individual accounts and determine which accounts require more time. This will alert for staff and managers to assess that account and investigate why so much time it is spent on that account. This process could possibly make the manager aware that there could be a problem with such account. Another objective of tracking the hours is to measure the efficient of the staff working on the audit. Some auditors might be misusing their time and others could be underreporting their time. This could be beneficial for mangers when they need to assess the staff auditors and help them during promotions. However, this could be a problem as we saw in the case with Lauren. This leads me to one of the implications of underreporting time. Colleagues can be affected because a person who underreports time, like Lauren, could possibly get an unfair promotion. Managers will evaluate how an individual performs based on the budgets, thus a person who underreports time spend working on an engagement will seem more efficient than other employees. In the case of Hamilton, if he reports all of his hours and Lauren does not, it will seem as if she was more efficient than him and is more likely to get the promotion. If Lauren can underreport her hours and get away with it, even benefiting by getting the promotion, her colleagues and other auditors will think it is acceptable to underreport their hours. This will result in even more unethical behavior by their colleagues and other individual auditors. Hamilton, for example, will feel that he could possibly get away with underreporting his hours since he is the timekeeper and someone else is doing it. Hamilton will not see his behavior as unethical but rather as an opportunity to level the playing field with Lauren in competing for the promotion. Therefore, if the unethical act of underreporting time continues without the individual been reprimanded, more auditors will be likely to follow Lauren’s example, creating an unethical work place. Underreporting time will also have an implication on the overall quality of the independent audits. If auditors realize they are spending more time than what was budgeted for a certain audit engagement, they will begin to cut corners and find other solutions to fall within budget. If auditors are more focused on meeting the budget, they might do their jobs in a rush manner, and possibly missing errors. Detecting errors is one of the responsibilities of the auditor, thus by cutting corners, and auditor can possibly violate their auditor’s responsibility. In the end, the quality of the audit will be low, which will not be good for the client; and not good for the firm in the long run. It is good to have auditors who are efficient but it becomes a problem when the quality of the audit drops. 3. What measures can accounting firms take to ensure that time budgets do not interfere with the successful completion of an audit or become dysfunctional in other ways? One measure accounting firms can take to ensure that time budgets do not interfere with the successful completion of an audit will be to decrease the focus on the time budget and raise the focus on the quality of the audit. Allowing flexibility in the time budget will give the auditors an incentive to be more honest about the time they actually spent on the engagement. If auditors are not so worried about meeting time budget, they can place their focus on the quality of the audit and will possibly do a better job. This will create an ethical work environment and reduce dilemmas like the one Hamilton is faced with. Having a flexible time budget could become a problem when presenting the budget to the client. However, I believe it could help in the completion of a successful audit. Another measure accounting firms can take to reduce interference of time budgets on the completion of successful audits is to create consequences for those who violate the code of ethics. If firms create penalties for those who falsify or lie on their time budgets, auditors will be less willing to underreport time. 4. What measures can accounting firms take to reduce the likelihood that personal rivalries among auditors of the same rank will become dysfunctional? One measure accounting firms can take to reduce the likelihood or rivalries among auditors of the same rank become dysfunctional is to create a better and more ethical work environment. If the firm takes measures to reduce the act of underreporting time, all auditors might be more ethical and will understand no one has a certain advantage over another. If auditors realize they all have a level playing field, personal rivalries will lessen and the audit will be successfully completed. In Hamilton’s case, he realizes that Lauren has an unfair advantage over him and might be willing to underreport his time; if this continues among all auditors, the work environment will become dysfunctional and the audit will not be completed successfully or with high quality. Another measure accounting firms can take to prevent personal rivalries is to implement clear policies about unethical behavior and fair incentives. If auditors perceive a fair playing field among all colleagues, they will be motivated to be more ethical and put personal rivalries aside, which will result in a successful completion of an audit.