JOSHI, KRISNA O.

ACCOUNTING CASE 3

PARAPROFESSIONALS ON AUDIT ENGAGEMENT

The managers and partners [who] were interviewed listed reduced manpower costs as
the major advantage for utilizing paraprofessionals [in CPA firms]. It seems that these
savings were realized in a number of ways.

First, there were significant savings in the salaries of paraprofessionals when compared
with new staff professionals.Furthermore, since a large number of paraprofessionals were
employed for less than 40 hours,many firms were realizing a significant savings in fringe
benefit cost. As one manager indicated, ―When we want to review inventory, we always
try to get our paraprofessional because of his experience in the use of the audit guide,
insights on inventory procedures, and level of training. ‖ Partners and managers indicated
that the part-time nature of the employment agreement for most paraprofessionals offered
the firm greater flexibility in scheduling work around peak business periods and aided in
reducing hours that cannot be billed. Certainly, the savings discussed above can have a
significant impact on dwindling profit margins or can be passed on to the client in the form
of reduced fees. As indicated [in this article], the billing rate for accounting
paraprofessionals [was much lower for paraprofessionals for both large and small firms].

Quality of work, especially on job assignments that require a large amount of detailed and
repetitive tasks, was also cited on several occasions as a major consideration when
employing accounting paraprofessionals. The fact that paraprofessionals are able to spend
longer periods of time on jobs and their willingness to do repetitive tasks may explain the
improved quality of work of paraprofessionals.

As one manager stated, ―The quality of work of our paraprofessionals far exceeds that
of our new staff professionals. ‖ Some of the practitioners who were interviewed still
expressed concerns about utilizing paraprofessionals and the legal implications of using
―less than qualified‖ individuals on audits. When considering using paraprofessionals on
audit engagements an argument could be advanced that the use of ―less than competent
audit personnel‖ is a violation of auditing standards. Of course, the basic question is: Do
these individuals possess the technical attributes one would normally expect of individuals
working in that capacity?

(Source: Adapted from Ted R. Compton, ―Staffing Issues for the New Millennium—The
Emerging Role of the Accounting Paraprofessional, ‖ Ohio CPA Journal (July–September
2000), pp. 56ff.)

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 JOSHI, KRISNA O. ACCOUNTING CASE 3

(a) Discuss the use of part-timers and paraprofessionals from the perspective of
controlling costs.

By hiring paraprofessionals, the company basically saves fringe benefit costs and
generate more savings in comparison with hiring new professionals as employees.
Moreover, savings comes from the difference in salaries when both paraprofessionals and
professionals are compared. It is also very advantageous for the company since they can
easily adjust workloads especially in busy periods of the year.

(b) How could the use of part-timers and paraprofessionals impair the quality of
work performed by public accounting firms?

Even there are advantages on hiring paraprofessionals, significant margin

concerning competency can still be observed and expected. Professionals are still more
equipped and licensed to do a job given that it is their specialty and they underwent
required education to meet the standards. Furthermore, independence is greatly needed in
public accounting and paraprofessionals can be questioned about their professional
judgement regarding on some processes that it is required.

(c) Is it ethical for a CPA firm to bill the time of paraprofessionals at the same
rate as fully qualified professionals? Discuss.

It is definitely not ethical for a firm to establish a rate that is the same for
paraprofessionals and fully qualified professionals. Both can do the same thing but a fully
qualified professional deserves to be billed according to his/her credentials. It is also a big
disrespect for all the hardships fully qualified professionals experienced.

(d) How could the use of part-timers and paraprofessionals affect the
effectiveness and efficiency of work performed in public accounting firms?

We can typically say that fully qualified professionals are more competent and
more equipped with skills and knowledge compared to part-timers and paraprofessionals,
however, this idea is not always true that is why companies commonly hire these types of
employees. In terms of effectiveness and efficiency, there is no assurance that hiring part-
timers and paraprofessionals will be a drawback, in fact their quality of work is better than
fully qualified professionals. Also, it is a great step for firms and corporations to hire them
given that the number of fully qualified professionals is decreasing.

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