After completing and discussing this case, you should be able to a Analyze a scenario where a taxpayer over-reports gross revenue, with rumots pointing to potential money laundering. a Examine data from five consecutive years to determine possible irrogularities in financial information. . Understand a tax preparer's responsibilities, under Circular 230 and the AICPA's standards, to report suspicious illegal activities occurring in a client's business. THE EXTRAORDINARY CHEF FACTS The Extraordinary Chef is an exclusive restaurant in the city. Reservations are difficult to obtain and the menu is pricey. The owner, Andrew, is rumored to be running an illegal gambling operation on the side, with revenue flowing through the restaurant to ensure there will be appropriate reporting of revenue and thus no consequences for tax fraud. Elaine prepares the corporate tax return for The Extraordinary Chef, based on amounts from Andrew's computerized general ledger, which he shares with her at year-end. After 10 years of working with Andrew in the preparation of his corporate tax return, she feels she understands the business fairly well. Elaine, a licensed CPA in the state and member of the AICPA, heard stories of the gambling operation, but having worked with Andrew for so long, dismisses the accusations as rumors. This year, however, the business showed a sharp increase in net income as well as revenue, including a large tax liability. Andrew did not complain about the taxes due, as he typically did when he first started. QUESTIONS AND REQUIEENENTS 1. What caused Elaine to question her client's tax return? 2. Using data provided, does Elaine have any support for her concerns? 3. What is Elaine's responsibility, under Circular 230 and other tax preparer ethics guidelines, regarding her suspicions