Laen BergVanden is a first-year staff auditor at CooperswaterhousePrice (CwP), one of the largest public accounting firms in the world. Laen had recently graduated from the State University of Grally Vand (SUGV) with an M.B.A. Accounting emphasis and had earned his B.B.A prior to that. At the time that Laen with CwP, his school rarely received much attention from campus recruiters at the major firms. Throughout his entire time in college, CwP had NEVER been on campus to recruit students, so Laen applied for this company online (assuming he had almost NO chance of being considered). About 2 weeks later, by some fluke, Laen received a phone call from a CwP recruiter informing him that they had an interview slot available the following day. A week after the interview and he received offer from CwP, and graciously accepted. In the end, Laen was one of only three new hires that year in the CwP office and the only person in the office (and greater market) that had graduated from SUGV. Laen believed that his school's accounting program was quite good, and getting better, but for some reason it had never received the attention other nearby schools. He thought that if he did a good job with the firm his performance might open doors for other students from his school. Adding to this pressure, one of the Accounting faculty members involved in the recruiting process (Dr. Nonnac), made a comment to Laen at graduation, "Congrats!....You gotta get them back here to recruit!". With a stern face and lifted brow, Dr. Nonnac went on to say, "Laen, Do NOT screw this up for us!"

From the beginning, Laen was impressed with the CwP. Not only did the firm's culture feel comfortable, but Laen he really liked his coworker's. Overall, he believed it would be a great fit for him professionally. When he started, Laen had a few engagements working closely with an experienced senior named Adom Landgreen, and they got along great.

In his 3^rd month with the firm, Laen started on the EarthWear engagement, but was working under a senior (Chris Mansway) and Manager (Dianne Morris) that he hadn't worked with before. However, Adom had properly trained Laen and for the most part the audit was going smoothly. One day, in the middle of the audit, Laen found that he was spinning his wheels. Chris left at noon to get some work started at his next engagement and was not answering his cell phone. After spending over an hour working on the bank reconciliation for the General Cash Account, he was frustrated and confused because he could not figure how to link the supporting documents to the reconciliation. Laen finally asked Roxanne Bailey, from EarthWear's Controller's office, to help him sort out the problem. It took Roxanne only a few minutes to realize that the accounting staff had inadvertently provided Laen with bank deposit slips for the wrong month, which of course did not match up with the bank statements or the reconciliation. Being a new auditor and unfamiliar with EarthWear's documentation, Laen assumed the supporting documentation provided by the client was correct and that the difficulty and confusion he was experiencing was due to his lack of knowledge and non-existent auditing skills. Laen was embarrassed that he had not looked more carefully at the dates, he wished he would have known how much time could be wasted and how frustrating a procedure can be when you don't properly validate the documentation before starting a procedures. It seemed like it took forever for Roxanne's staff to track down the correct deposit slips so that Laen could proceed with the planned audit procedures. In total, Laen estimated that he had "wasted" over two hours. Laen was worried that he would not be able to complete the cash audit area in the eight hours budgeted. As Laen began working on the reconciliation again, Chris called and said:

"We are really under the gun with the budget on this audit. I know there were originally eight hours allotted to the cash audit, but I think six hours should be enough. Make sure to be efficient. This is an easy account to audit, I don't need you spinning your wheels and going over budget. Now, what were you calling about earlier?"

Laen was too embarrassed to tell Chris about what had happened with the deposit slips, so just said, "It isn't an issue, I got it worked out". As Chris was talking about reducing the budgeted hours, Laen remembered that when he looked at last year's working papers the procedures were the same as for the current year and the budgeted hours for cash last year was eight. He had also noticed that the staff person had gone over budget last year. Now Chris wanted Laen to do it in six hours and he had already "spun his wheels" for two hours.

Chris's words were echoing in Laen's mind as he worked hard to complete the cash area. As it came time to go home, it became more and more clear that Laen was not going to be able to complete the cash procedures within six hours. After contemplating his situation for a couple minutes he decided that he'd better call Chris and tell him what had happened with the mixed up bank deposit slips. After Laen explained the situation, Chris was silent for a long time and then finally said:

"Look, we are just going to have to eat that lost time. I just got done speaking with Dianne and she is adamant about finishing this audit under budget. Dianne is up for promotion to senior manager and I'm sure she doesn't want an over-budget audit right before the partners meet to decide her promotion. Don't worry about it, Laen. Stuff happens and it was partly the client's fault anyway. Just take as long as you need to finish the planned procedures and then put down six hours on the work schedule."

From what Chris said, it seemed that Dianne Morris, the manager on this audit, was the one who was applying the pressure on Chris to keep the audit under budget. But eating time just didn't feel right. Laen hesitated and then said, "I don't know Chris. Don't you think we'd better just mark down the actual hours?"

Chris sighed deeply and said:

"Laen I know you are new, but this stuff happens all the time. Think of it as spending a couple extra hours on personal development. In recent planning meetings, the partners have really been stressing the importance of not letting jobs get out of control. An over-budget audit won't look good for any of us right before performance evaluations. Look Laen, I promise eating time is no big dealpeople do it all the time. You want a good performance eval, don't you? Let's just dig in and finish up this audit so we can move on to the next engagement. After you finish with cash, I want you to work on accounts receivable. I'll help get you started and it should go pretty quickly."

With a quick, "See ya, man," Chris hung up the phone. His pep talk didn't help Laen feel any better about what he was being asked to do. Nevertheless, he still had to finish cash before he left for the night.

Laen spent the next few hours logging in, examining, and tying out the bank confirmations, wrapping up the testing of bank reconciliations for the various accounts, and completing the necessary documentation in the working papers. He checked his watch as he finally finished and signed off on all the steps in the cash audit program and it was nine o'clock. His head and body ached as he packed up his things and closed down his notebook. He had spent over 10 hours to complete the audit program for cash.

He thought back to his earlier engagements with Adom, and looked over the budget. There were a couple of areas that Laen had gone over budget but had never felt pressure to 'eat time' from Adom. As he was pondering on how he should handle the situation, he thought back on those seemingly endless ethics discussions he had to listen to in his auditing and other business classes. They had seemed so boring and irrelevant at the time. But now he remembered various professors making claims about ethics:

"I'm confident that you will be challenged ethically as an accounting professional, and it'll probably happen sooner than you think. Be prepared!"

"The benefits rarely outweigh the costs. This may be due to us being unable to measure the potential future costs against the immediate benefit that we see, or we people are just delusional enough to think they won't get caught. Remember, there is always evidence and there is also someone who knows how to find & use that evidence, either for or against you."

"The first time you engage in unethical activity will be difficult and you should feel guilty. But each time after that, it will get easier on your conscience. For you economics folks, I call this diminishing marginal guilt. So, when that first dilemma comes about, do NOT convince yourself that it is not serious, or that this is the only time you'll do something wrong. Because if you can convince yourself of either of those, then rest assured, it will NOT be the only time you lie to yourself!"

1)List three alternative options available to Laen:

2)What are the pros or potential upside of each alternative you listed above?

3)What are the cons or potential downside of each alternative?

4)What are the immediate implications of "eating time" for Laen, the firm, and others involved?

5)What are the future implications of "eating time" for Laen, the firm, and others involved?

6)Alternatively, what are the implications if Laen decides not to follow Chris's advice and record the accurate time spent on the cash audit?

7)In your opinion, which of Laen's alternative courses of action would provide the best outcome and why?