Case 7.8
FRANK COLEMAN, STAFF ACCOUNTANT
Synopsis
Overtime is one of those “touchy” subjects that public accounting firms are not prone to discuss
at length with prospective employees. This case examines the overtime issue in the public
accounting profession from the standpoint of an individual who, after resigning his position with one
of the Big Four accounting firms, was asked to become a party to one of the many “overtime”
lawsuits pending against those firms.
Each of the Big Four firms faces multiple lawsuits that charge them with failing to pay overtime
to thousands of current and former “non–exempt” employees. State and federal labor laws exempt
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Frank Coleman, Staff Accountant—Key Facts
1. Like most auditors employed by Big Four accounting firms, a significant amount of overtime
was a fact of life for Frank Coleman.
2. While a staff accountant with a Big Four firm, Frank was required to work 70 hours per week
3. A key factor responsible for the significant amount of overtime that Frank was required to work
was the high turnover rate experienced by his practice office.
4. Despite frequent reassurances from his superiors that his commitment to the firm and personal
6. In recent years, each of the Big Four firms has been sued for allegedly failing to pay overtime to
7. State and federal labor laws generally mandate that employers pay overtime to employees who
8. In response to the overtime lawsuits, the Big Four firms have typically asserted that even their
9. Recently, the Canadian affiliates of the Big Four firms have all agreed to begin paying overtime
to their entry-level employees.
10. The monetary damages being demanded by the plaintiffs in the overtime lawsuits filed against
Big Four firms in the U.S. are very significant.
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Instructional Objectives
2. To examine a major economic problem that the Big Four accounting firms presently face.
Suggestions for Use
By the time that you cover this case in class, there may be some significant developments in the
pending overtime lawsuits facing the large accounting firms. As noted in the case, the Canadian
affiliates of the Big Four firms who were facing similar lawsuits each capitulated and began paying
overtime wages to their entry-level employees. In fact, as also noted in the case, KPMG Canada
issued a formal apology to its current and former employees who had been improperly denied
overtime wages. Consider having your students or a group of your students research recent
developments regarding the overtime lawsuits and then provide a brief in-class report of their
findings.
Suggested Solutions to Case Questions
1. This is a discussion question for students that doesn’t have a definitive answer. For a question
such as this, I often draft two groups of students and then have those groups debate the given issue.
2. Here are two more “discussion questions” that are linked to the first case question. The
“tension” in this context typically revolves only around those audit employees below the level of
audit senior. Most students, and even most plaintiff attorneys in the overtime lawsuits, agree that
individuals at the rank of audit senior and above qualify as “professionals.” Implicit in many of the
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3. As suggested in the case, a key element of the defense “strategy” used by the major accounting
firms in responding to the overtime lawsuits is to maintain that audit staff below the level of audit
senior do not require close supervision and have the ability to exercise independent discretion and
judgment. If those two conditions are met, among others, then, at least in certain jurisdictions, the
given audit staff are “exempt” employees and it is not mandatory for employers to pay them
resolve important technical issues that arise on an engagement. However, that excerpt and the
accompanying text does not refer to the need to “closely supervise” inexperienced staff assigned to
an audit team nor does it suggest that inexperienced audit team members are prohibited from
exercising “independent discretion and judgment.”
The PCAOB devoted an entire auditing standard to the topic of supervision, namely, Auditing
4. Another discussion question for your students. Surprisingly, I have found that many students are
unaware that the “Big” accounting firms tend to require entry-level audit staff to work a considerable
amount of overtime. Unfortunately, there is not much in the way of empirical evidence regarding
the “typical” amount of overtime worked annually by entry-level auditors of the major accounting
firms. My case reports the results of two nationwide surveys that provide insight on that issue but,
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