Reference no: EM132640453

Question - A time budget is always prepared for multiple 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 quote within budget and quote and evaluate staff accountants' performance in part on the ability to perform audit work efficiently within budget. Jessica Sarah 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 raised this year. 20 hours are 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 actions of 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?