Barbara Montgomery is a first-year auditor for Coopers and Rose, a large public

Question

Barbara Montgomery is a first-year auditor for Coopers and Rose, a large public accounting firm. She has been assigned to the audit of Lakers Brothers, a clothing retailer with retail outlets throughout the United States. This audit has proved troublesome in the past, and during a staff meeting preceding the audit, Robert Cooley, the supervisor on the audit , says: "We are going to be required to work several hours 'off-the-clock' each week until this audit is completed." He also observes that the client is putting a great deal of pressure on the firm to maintain an acceptable level of fees. Barbara has just been to staff training school, where it was emphasized that not charging a client for hours actually worked is a violation of Coopers and Rose`s employment policy, a violation that could cause her to be dismissed. She also knows that only staff personnel are paid overtime and that supervisors are evaluated on successfully completing audits within allowable budgets. Barbara discusses the issue with John Reed, a second-year staff accountant. John says, "Don`t worry, if you go along nobody will find out and Robert will give you a good evaluation." John also says that Robert is very highly regarded by the senior members of the firm and is likely to be promoted to manager in the near future.

Required:

a. Is it ethical for Barbara to work hours and not charge them to the client?

b. Use the six-step approach to resolve this ethical dilemma.

Explanation / Answer

Answer:a It is not ethical for Barbara to work hours and not charge them to the client. This is a violation of the firm's employment policy that could cause her to be dismissed. This practice could also cause problems is subsequent years when the amount of hours necessary to complete the Lakes Brothers audit in compared to the current year.

Answer:b 1. Obtain the relevant facts. - Barbara Montgomery is being pressured to work hours on the Lakes Brothers audit "off-the-clock."

2. This practice is against her auditing firm’s employment policy, a violation that could cause her to be dismissed. This practice could also cause problems in subsequent years when the amount of hours necessary to complete the Lakes Brothers audit is compared to the current year.

3. The individuals affected by this decision are Barbara, Robert Cooley her supervisor, the partner in charge of the job, the accounting firm Coopers and Rose, subsequent years' audit teams and the client Lakes Brothers.

4. Possible alternative solutions:

a. work "off-the-clock"

b. Refuse to work"off-the-clock"

c. Report the situation to the partner in charge of the audit

d. Report the situation to a mentor or an ombudsman within the firm and ask for advice.

5. Possible outcomes of alternative solutions:

i. Barbara will be seen as a team player by her immediate colleague. Robert Cooley will be assisted in bringing the job in at or under Budgeted hours. The partner in charge will be mislead about the hours necessary to actually complete the job. The firm and the client will also be mislead as to the actual hours necessary to complete the job

ii. Barbara will not be viewed as a team player. Cooley will probably give her an unfavorable review; and he will be less likely to buy the job in under budget. The partner in charge will be informed about the hours necessary to complete the job but may be faulted by others in the firm for failing to buy the job at budget. However, the original situation may not be exposed. The firm and the client will be unhappy because the job has not been completed within budged hours; however, they will be informed of the time necessary to actually complete the job.

iii. This alternative depends upon whether or not the partner is also pressuring Cooley to have staff members work “off-the-clock." Assuming the situation is all Cooley's idea, Barbara will be bringing a violation of company policy to the partner's attention. Cooley faces discipline. The firm and the client will be more knowledgeable concerning the actual hours necessary to complete the job.

iv. This is a possible solution that may not directly affect Barbara Montgomery. An internal investigator will probably cause Cooley to be disciplined.

However, the other partners will be affected in a manner similar to C. The most appropriate action is D if it is available. This alternative does not cause Barbara to directly confront a superior in the firm and ensure that the violation will be exposed at the highest levels of the firm.

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.