Tommy O’Connell had been a senior with one of the major international accounting firms for less than one month when he was assigned to the audit engagement for the Altamesa Manufacturing Company.1 Tommy worked out of his firm’s Fort Worth, Texas, office, while Altamesa was headquartered in Amarillo, the “capital” of the Texas Panhandle. The young senior realized that being assigned to the tough Altamesa engagement signaled that Jack Morrison, the Altamesa audit partner and the offi ce managing partner, regarded his work highly. Serving as the audit senior on the Altamesa job would allow Tommy to become better acquainted with Morrison.

Despite the challenges and opportunities posed by his new assignment, Tommy did not look forward to spending three months in Amarillo, a five-hour drive from Fort Worth. This would be his first assignment outside of Fort Worth since his marriage six months earlier. He dreaded breaking the news to his wife, Suzie, who often complained about the long hours his job required.

Altamesa manufactured steel girders used in the construction and renovation of bridges in West Texas, New Mexico, Colorado, and Oklahoma. The company’s business was very cyclical and linked closely to the funding available to municipalities in Altamesa’s four-state market area. To learn more about the company and its personnel, Tommy arranged to have lunch with Casi McCall, the audit senior on the Altamesa job the two previous years. According to Casi, Altamesa’s management took aggressive positions regarding year-end expense accruals and revenue recognition. The company used the percentage-of-completion method to recognize revenue since its sales contracts extended over two to five years. Casi recounted several disputes with the company’s chief accountant regarding the estimated stage of completion of jobs in progress. In an effort to “front-load” as much of the profit on jobs as possible, the chief accountant typically insisted that jobs were further along than they actually were.

Speaking with Casi made Tommy even more apprehensive about tackling the Altamesa engagement. But he realized that the job gave him an excellent chance to strengthen his fast-track image within his offi ce. To reach his goal of being promoted to manager by his fi fth year with the fi rm, Tommy needed to prove himself on difficult assignments such as the Altamesa engagement. It was late May, just two weeks before Tommy would be leaving for Amarillo to begin the Altamesa audit—the company had a June 30 fi scal year-end. Tommy, Jack Morrison, and an audit manager were having lunch at the Cattleman’s Restaurant in the Cowtown district of north Fort Worth.

“Tommy, I’ve decided to send Carl with you out to Amarillo. Is that okay?” asked Jack Morrison.

“Uhh . . . sure, Jack. Yeah, that’ll be fi ne,” Tommy replied.

“Of all people,” Tommy thought to himself, “he would send Carl Wilmeth to Amarillo with me.” Carl was a staff accountant with only a few months’ experience, having been hired in the middle of the just-completed busy season. Other than being auditors and approximately the same age, the two young men had little in common.

Tommy was from Lockettville, a small town in rural West Texas, while Carl had been raised in the exclusive Highland Park community of north central Dallas. Texas Tech, a large state-supported university, was Tommy’s alma mater. Carl had earned his accounting degree from a small private college on the East Coast.

Tommy did not appreciate Carl’s cocky attitude, and his lack of experience made him a questionable choice in Tommy’s mind for the Altamesa engagement. As he tried to choke down the rest of his prime rib, Tommy recalled the complaints he had heard about Carl’s job performance. Over the past three months, Carl had worked on two audits. In both cases, he had performed admirably—too admirably, in fact, coming in well under budget on his assigned tasks. On one engagement, Carl had completed an assignment in less than 60 hours when the audit budget allotted 100 hours; the previous year, 110 hours had been required to complete that same task. Both seniors who had supervised Carl suspected that he had not completed all of his assigned audit procedures, although he signed off on those procedures on the audit program. The tasks assigned to Carl had been large-scale tests of transactions that involved checking invoices, receiving reports, purchase orders, and other documents for various attributes. Given the nature of the tests, the seniors would have had difficulty confi rming their suspicions.

Questions

1. Compare and contrast the professional roles of an audit senior and a staff accountant. In your analysis, consider the different responsibilities assigned to each role, the job-related stresses that individuals in the two roles face, and how each role contributes to the successful completion of an audit engagement.
Which of these two roles is

(a) more important 

(b) more stressful? Defend your choices.

2. Assume that you are Tommy O’Connell and have learned that Carl Wilmeth will be working for you on the Altamesa audit engagement. Would you handle this situation any differently than Tommy did? Explain.

3. Again, assume that you are Tommy. Carl is badgering you for something to do midway through the Altamesa job. You suspect that he is not completing all of his assigned procedures, but at the time you are wrestling with an important accounting issue facing the client. What would you do at this point? What could you do to confi rm your suspicions that Carl is not completing his assignments?

4. Now, assume that Jack Morrison is reviewing the Altamesa workpapers. To date, you (Tommy) have said nothing to Morrison about your suspicions regarding Carl. Do you have a professional responsibility to raise this matter now with Morrison? Explain.

5. Assume that at some point Tommy told Morrison that he suspected Carl was not completing his assigned tasks. The only evidence Tommy had to support his theory was the fact that Carl had come in signifi cantly under budget on every major task assigned to him over a period of several months. If you were Jack Morrison, how would you have handled this matter?