Jerry Martin owns and manages Jerry's Restaurant, a 24-hour restaurant near the city's medical complex. Jerry 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 Jerry's public accountant Andrea Sun. Jerry pays all of his part-time employees in cash. He computes their wages and withdraws the cash directly from his cash register. Andrea has repeatedly urged Jerry to pay all employees by check. But, as Jerry has told his competitor and friend, John Hayward, who owns the Blue Plate Special, "First of all, my part-time employees prefer the cash 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."

Instructions

(a) Who are the stakeholders in this situation?

(b) What are the legal and ethical considerations regarding Jerry's handling of his payroll?

(c) Andrea Sun is aware of Jerry's payment of the part-time payroll in cash. What are her ethical responsibilities in this case?

(d) What internal control principle is violated in this payroll process?