Auditing Considerations of Padding and Eating Billing Time: Ethical and Managerial Implications

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Abstract

The authors suggest that the practices of charging more time (padding time) or less time (eating time) than was actually spent on an accounting or auditing engagement are both dishonest behaviors that can negatively impact the ethical tone-at-the-top in CPA firms. Either of these behaviors can result in the firm incorrectly determining the profitability of engagements and the efficiency of staff. Pressure applied, either directly or indirectly, may result in management issues related to employment stress and turnover. This paper includes a discussion of how directly or indirectly incentivizing staff to engage in either of these practices contradicts the Code of Professional Conduct and Bylaws of the AICPA and asks the following question: Can CPAs be asked or pressured to be dishonest in recording their time while at the same time being asked to act ethically in other areas of professional practice? For example, is cheating on time consistent with honestly recording (signing off on) audit steps that were completed? Does dishonestly recording time possibly create or, at least impact, an unethical culture?

Authors

• Donald Lamar Ariail, Kennesaw State University

• Tara J Shawver, King's College

• Lynn H. Clements, Florida Southern College