Tim Duggan owns and manages Sky Restaurant, a 24-hour restaurant near the city’s medical complex. Tim employs 9 full-time employees and 16 part-time employees. He pays all of the full-time employees by check, the amounts of which are determined by Tim’s public accountant, Cheryl Williams. Tim pays all of his part-time employees in currency. He computes their wages and withdraws the cash directly from his cash register. Cheryl has repeatedly urged Tim to pay all employees by check. But as Tim has told his competitor and friend, Sara Hill, who owns the Sara’s Diner, “First of all, my part-time employees prefer the currency over a check, and secondly I don’t withhold or pay any taxes or workmen’s compensation insurance on those wages because they go totally unrecorded and unnoticed.”
Who are the stakeholders in this situation?
- What are the legal and ethical considerations regarding Tim’s handling of payroll?
- Cheryl is aware of Tim’s method of payment of his part-time employees. What are her ethical responsibilities in this situation?
- What internal control principle is being violated