Reference no: EM131622261

Question: Engagement Timekeeping Records. A time budget is always prepared for audit engagements. Numbers of hours are estimated for various segments of the work, for example, internal control evaluation, cash, inventory, and report review. Audit supervisors expect the work segments to be completed "within budget" and evaluate staff accountants' performance in part on the ability to perform audit work efficiently within budget. Jessica Sara is an audit manager who has worked hard to get promoted. She hopes to become a partner in two or three years.

Finishing audits on time is heavily weighted on her performance evaluation. She assigned the cash audit work to Paul Ed, who has worked for the firm for 10 months. Ed hopes to get a promotion and salary raise this year. Twenty hours were budgeted for the cash work. Ed is efficient, but it took 30 hours to finish because the company had added seven new bank accounts. Ed was worried about his performance evaluation, so he recorded 20 hours for the cash work and put the other 10 hours under the internal control evaluation budget.

Required: What do you think about Ed's resolution of his problem? Was his action a form of lying? What would you think of his action if the internal control evaluation work was presently under budget because it was not yet complete and another assistant was assigned to finish that work segment later?