Executive Summary

James Michaels, a senior associate at Richard, Wood and Hulme LLP (RWH) has been
working for one of important client Spector Industries Limited (Spector). The team was facing
low morale and missing individual commitment as a result of an ineffective management system,
poor team structure design and job security concerns. Michaels also has to manage replacement
for two resources since they were fired while unable to clear their accounting exams. There were
three alternative solutions that were proposed to RWH to address issue (1) solve major problems
related to the current situation of the team, (2) helping to build new collaboration culture, and (3)
foster the efficiency and effectiveness of the team.
Situation Analysis
Richard, Wood and Hulme LLP (RWH), a mid-size professional services firm was established in
1998 by three friends Chris Richard, Genna Wood and Lauren Hulme. RWHs offered audit and
taxation services and have corporate culture consists of teamwork and collaboration among
employees. Teams work on fixed deadlines that had specific financial reporting requirements
while company has high level of intolerant for individuals with poor teamwork and had
terminated a few employees since the inception of the firm. RWH lost few clients during global
meltdown and had to manage low margins since it has a surplus of employees without any work.
Later it got business opportunities occurred in 2011 from Canadian financial reporting standards
from GAAP to IFRS, and RWH was able to retain its team members.
In fall of 2008, RWH began the year-end audit of Spector, a renowned residential real estate
company founded in 1975 in Toronto, Ontario. By the late 1990s, Spector was engaged in real
estate developments across the country and in 2003 after participating in a successful initial
public offering (IPO) Spector raised CDN$275 million which allowed Spector to expand its
business in the booming markets of condominium markets of Vancouver and Toronto.
RWH team includes following key members:
Name

Roles

Genna Wood

Oversee all audit projects

Adam Nguyen and Keri Feldman

Senior managers responsible for assisting

Wood

Jody Ellis

Senior associate (assist other senior

associates)

Kira Dee

Senior associate (assist other junior

associates & Students)

James Michaels

Senior associate (member of engagement

team for three years working on Spectors
project)

Heather Goodman, Mariana Faust and

Scott Ireland

Junior associates

Adrian Noth, Arvind Patel and Caleb

Oldman

Co-op students

RWHs audit engagement team successfully completed Spectors 2007 audit within the
demanding two-and-a-half week deadline. However, they faced many challenges in 2008 during
the first two weeks of the project due to the following reasons:

Non advanced planning: senior associate Ellis was on six weeks paid study leave during
the summer, she was unable to plan the Spector audit engagement which is ideally done
in quite advanced time. In Spectors case for the 2008 audit, it was particularly important
that planning for the audit was completed well in advance due to the current adverse
economic circumstances combined with the nature of Spectors business activities. Ellis
and several other teammates realized this but were involved with several other clients and
did not have sufficient time to satisfactorily plan for the audit.

Timing issue: The audit would likely take a longer period of time to complete than the
promised two and half weeks (the audit team completed the audit in this time frame in
2007) due to a) the expectation that extra work would be required related to possible asset
and receivables write-downs as a result of the economic downturn; b) some accounting
policies had been changed, which led to more time required from senior associates. c)
Tax team did not attend the planning meeting while Dee and Michaels had to allocate
time to answer their questions during the audit.

Missing information: On the first day of the 2008 audit Spector did not provide necessary
information to the audit team. It was not until the third day of the audit that the client
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finally provided team with any information. Michaels was unsure about the two co-ops
dedication as learned from other associates that the two students shirked work during
previous engagement. Michaels had to restart 25 hours of work due to client revisions to
forecasted financial information. The senior associates leading the audit refused to allow
idle personnel at the firm to assist in speeding up the audit for fear that adding team
member unfamiliar with Spector would cause further delays.

Unwillingness to add team members: The senior managers had been unwilling to add
additional team members. Ellis and Dee, the top performers, who had always worked
exceptionally well in teams were fired for not passing their chartered accountancy exams,
further reducing capacity dedicated to the Spector audit.

Problem Analysis
The key problem analysis is as follows:

Low pace of work: Current work pace and with no immediate resolution to the issues
currently plaguing the team with less than 50% of the audit complete on the Friday prior
to the following Wednesday deadline.

Audit complexity: The 2008 Spector audit is much more complex and as such will take a
much greater number of hours and a high level of cooperation among the team members
to complete by the deadline.

Inadequate planning: The 2008 Spector audit has been plagued from the start beginning
with inadequate firm planning combined with the poor economic circumstances, which
has substantially increased the number of hours necessary to complete the audit in many
different ways.

No proper flow of information: Michaels and the remainder of the audit team was not
informed as to why Ellis and Dee were fired, meaning Fair Process was not practiced in
this situation, which has caused more junior associates to question the stability of their
own jobs since at this point it is assumed that if one does not pass the chartered
qualification exam, he or she will be fired.

Alternative Solutions
Solution 1: Promote Michaels to replace Elliss position

Michaels will take over Elliss position on Spectors audit to continue working with the
rest of team and complete the audit by November 19, 2008. Each junior associate will team up
with one co-op student intern, and report to Michaels. Michaels will be responsible for managing
this team and will set deadline for their daily tasks. Initially, Michaels will need to get the
engagement planning from Nguyen. Then, Michaels will report to Nguyen and Feldman and
provide them daily updates afterwards.
PROS

CONS

Michaels familiarity with Spectors

business and his position

Michaels lack of experience of managing

teams

Michaels holds necessary professional

qualification for the audit

Michaels hasnt built good client

relationship as Ellis did

Michaels been part of engagement team

from past three years

Team miss necessary support, and has to

address timeline pressure

Solution 2: Restructure the audit team for a week

Both Nguyen and Feldman will fill in for Ellis and Dees position for a week, and
prioritize Spectors audit first. Wood needs to have a meeting with the team and explain the
situation and changes to the team members and their responsibilities. Nguyen and Feldman will
lead Michaels, three junior associates and three co-op interns to complete Spectors audit. Faust
will assist Michaels to review Spectors revised financial information. Team members will be
working on weekend except Scott Ireland and Heather Goodman who will study for their
professional exams.
PROS

CONS

Both Nguyen and Feldman are senior

managers and holds necessary team
management experience.

Adding two senior managers will boost the

confidence of the audit team

Both of them are aware of the engagement

plan and status of the audit so it will be easy
for them to work with the team

Nguyen and Feldman have to put their other

audits aside for a week

They will have reach out to their other

clients to postpone the audit completion
date
Everyone will have to work on weekends in
order to complete audit on time which will
put a lot of stress on them

The team will have sufficient support from

the senior managers which can improve
teams efficiency to meet the deadline

Adding new members to the audit team will

add unsteadiness to the whole team which
is beginning to fall apart

Solution 3: Give incentives to audit team for meeting the deadline

The final solution is giving rewards to motivate existing team members. Employees are
easily motivated when they are recognized or rewarded for their positive accomplishments.
RWH should give instant rewards (bonus based on performance) to those who worked out of
their way to achieve companys goals in an adverse event.
PROS

CONS

It would not require a great deal of time to

make it work promptly

It adds cost to operating expenses which

RWH is trying to cut down

It will results in an improvement of their

morale and commitment

It can to be seen as an entitlement rather

than a motivator

It will improve employees attitude and

improve the working atmosphere

Need to create goals that can be readily,

objectively measured

Recommended Solution
James Michael works as the senior associate with RWH, mid-sized professional service firm.
James has to take care of audit since it is still 50 percent left and two of his team members, Ellis
and Dee got fired since they dont clear charted accounting qualification examination. The client
for given audit work is Spector Industries, a residential real estate company. There is also some
reschedule of work was also done since the client has not prepared supporting document
correctly. The recommended solution to address the problem includes: getting some other
resources like presently available senior associates who can be immediately attached to the given
project however since adding new team members who are not familiar with the client would
cause further delay. This delay can be avoided through ensuring Ellis and Dee support them for
this audit through providing offline support like sharing their existing notes, provide context
about overall work that they have done so far and able to close audit on time. The effective
handover plan is enabled so that new resources can get well versed with project effectively.

Implementation Steps
James has to ensure that an effective project management approach is undertaken through the
process of selecting new resources, doing work allocation and to track progress so as to achieve
the audit outputs. The necessary steps of implementing the recommend solution by the James
Michael include: Selecting the right resources: James has to select two senior associates who can
take care of role of Ellis and Dee. The selection of resources has to be done based on their
qualification, previous work experience and relevant client handling capability. The resources are
selected and immediately aligned with the project while their individual roles and responsibilities
are clearly defined at the initial stage. Doing the necessary handover: Both the selected
resources have to be given handover of so far working done by Ellis and Dee. All the so far
research work, audit papers can be provided so that they can start understanding the required
role. Ellis and Dee can also be called upon on ethical ground to help with easy handover process.
Both of them can provide critical information about the client, so far audit work to make
associate scale up on their project work. Both the resources can also work closely with the client
to get the necessary handover done effectively. Informing client and reschedule activities:
Spector Industries team need to be informed about the new team structure so that they are aware
of the new team dynamic. The discussion with the client is done so that reschedule of activities is
done on basis of preparing new supporting document. The mutually agreed timeline to work
on a similar line than previously scheduled works so as to achieve audit output. Tracking
work progress: the work progress to be tracked so that overall deliverables are managed as per
deadline. The tracking of work progress is done in terms of defining roles and responsibility
while publishing status on a weekly basis. The progress tracking will help the team to well
manage deliverable and to meet the targets.