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 qualifi
ed” 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 theAccounting Paraprofessional,” Ohio CPA Journal (July–September 2000),
pp. 56ff.)

a. Discuss the use of part-timers and paraprofessionals from the perspective of controlling
Costs.

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

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

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