The consequences for Brent, the auditing firm, and others involved that may arise from “eating time,” as suggested by Scott.
“Eating time” can lead to inaccurate budgeting for future audits.
Managers in preparing the budget for an audit, often use prior years’ audits as a guide. Managers will see that the job was completed in a shorter time in previous years and this will prompt them to prepare next year’s budget based on this assumption.
Staff accountants on future audits will have pressure to complete audit segments in less time than is realistic, (based on last year’s time) and this can become a cycle, with each year’s budget becoming tighter and less realistic. This can cause undue stress and problems for future staff accountants.
In the end, eating time is dishonest in that it is an action intended to deceive the users of the time budget report.
The consequences for Brent, the auditing firm, and others involved that may arise from not completing audit procedures as suggested by Megan:
Skipping audit steps can have very serious consequences.
By not completing the audit steps, material misstatements may slip past the auditors. The auditors may then issue an inappropriate audit opinion, which can be very costly.
Skipping audit steps can lead to inaccurate audit decisions. Material misstatements could go unnoticed by the firm and this also raises a serious ethical issue with serious possible consequences for the auditors involved and the firm which may be a subject of litigation, prosecution and liability.
Our opinion on Brent’s best alternative course of action that would provide the best outcome and how Brent deals with the ethical problem under this alternative.
The best alternative that we suggest for Brent is to communicate with the manager about not agreeing with cutting off the auditing hours to 35 hours and persuade the manager to...