Navigating the complexities and pressures of a new auditing career.
Guido van Drunen is a retired Big-4 partner, an adjunct professor at Santa Clara University, and a Markkula Center Faculty Scholar.
Background
Claire is a recent graduate majoring in accounting, with a minor in management information systems. She had taken four months off prior to starting her new role with a Big 4 accounting[1] firm so she could complete all parts of the CPA exam prior to commencing work, thinking this would allow her to focus fully on her new job as an audit associate.
Claire has chosen to work for a firm where she interned for a summer; she is very much looking forward to getting started. The firm is focused on the audit of technology companies and start-ups, having built up a sizeable portfolio in this area.
On her first day, Claire learns that both the partner and the senior manager whom she admired and trusted have both left the firm to pursue other opportunities. As a result, Claire now has a new manager (Fred), and senior manager (Ted), and is working for a newly minted partner (Carol) who was just asked to lead the audit for a new key client, Company Z.
The new partner, Carol, was the individual who led the process and submitted the proposal to win the bid as the new auditor for Company Z. There is a lot of excitement and buzz about the new client, and everyone is very keen to get started, both on transitioning the client and the actual audit work. Claire is proud to be part of this team and keen to help the audit team in the best way she can, but she is also a little intimidated by what she feels is pressure to do well.
The Dilemma
After about two weeks of working on the engagement, it is clear to Claire and the rest of the engagement team that the hours estimated to complete the audit, which were included in the proposal used to win the audit, are not enough to complete the work. To complete the actual work required to render an audit opinion is double the currently budgeted hours, contrary to the proposal used to win the audit engagement.
At the same time, there are a lot of comments being made as to how budgets are not being met and that the team needs to be more efficient and effective. No guidance is provided on how this effectiveness and efficiency is to be achieved, but there seems to be an underlying message that the team should not charge all the hours worked on the job and book some of the time spent on the audit to training and administrative tasks.
A week later, Claire is called into Ted’s office and told she is charging too many hours to the job and the work she is completing is taking too long, even for a new associate. Claire later finds out that other associates on the team have had similar discussions and they are all feeling uncomfortable. Many have raised their concerns to Fred, and he says not to worry and to dial back the hours on the time sheets, without explicitly stating that time worked on the client shouldn't be charged.
To further complicate matters, the new team members are now receiving emails that they have, as of yet, not all completed their required firm training. This must be completed within 2 weeks, or the partner will be informed, and it could result in disciplinary action. As a result, one of the associates suggests doing training at her house on Friday, Saturday, and Sunday, where they can work as a team to get it done so they all stay off any list maintained by the compliance department for not completing the required training on time. All the team members are confused as to whether they should charge this time to training as this is being done on the weekend.
Questions to consider
- What are the key ethical issues facing Claire and the other new associates who are part of the Company Z audit team?
- What are some of the avenues that are open to Claire and the other associates to deal with the issues identified?
- What are some of the factors that have led to this situation?
- What professional responsibilities do the associates on the audit team have?
- What is the role of Carol, the newly minted partner in this case?
- Using the Markkula Center’s Framework for Ethical Decision Making, how would you analyze this case and then create talking points using the giving voice to values methodology?
[1] A Big 4 accounting firm is one of the following firms: KPMG, PWC, E&Y or Deloitte