Question

Jayson Swanson owns and manages Jayson's Restaurant, a 24-hour restaurant near the city's medical complex. Jayson employs 8 full-time employees and 15 part-time employees. He pays all of the full-time employees by check, the amounts of which are determined by Jayson's public accountant, Sasha Quin. Jayson pays all of his part-time employees in currency. He computes their wages and withdraws the cash directly from his cash register.

Sasha has repeatedly urged Jayson to pay all employees by check. But as Jayson has told his competitor and friend, Josephine Smith, who owns the Tea & Crumpets, "My part-time employees prefer the currency over a check. Also, I don't withhold or pay any taxes or worker's compensation insurance on those cash wages because they go totally unrecorded and unnoticed."
Instructions
(a) Who are the stakeholders in this situation?
(b) What are the legal and ethical considerations regarding Jayson's handling of his payroll?
(c) Sasha Quin is aware of Jayson's payment of the part-time payroll in currency. What are her ethical responsibilities in this case?
(d) What internal control principle is violated in this payroll process?

Answer 1

The stakeholders in this situation are Jayson Swanson, his employees, Sasha Quin, Josephine Smith, and the government. Jayson should comply with legal and ethical considerations regarding his payroll, and Sasha has an ethical responsibility to advise Jayson properly. The violation of the segregation of duties principle can be identified in this payroll process.

Step-by-step explanation:

a) The stakeholders in this situation are Jayson Swanson (the owner and manager of Jayson's Restaurant), Jayson's full-time employees, Jayson's part-time employees, Sasha Quin (Jayson's public accountant), Josephine Smith (Jayson's competitor and friend), and the government (which should receive taxes and worker's compensation insurance).

b) Legal considerations include the requirement to withhold and pay taxes and worker's compensation insurance, as well as the obligation to keep accurate records of wages. Ethical considerations include treating employees fairly, complying with tax laws, and not engaging in fraudulent practices.

c) Sasha Quin has an ethical responsibility to advise Jayson to pay the part-time employees by check and to report any illegal or unethical activities related to payroll.

d) The internal control principle violated in this payroll process is segregation of duties, as Jayson handles all aspects of the process without any checks or balances.