Case 2-3 Taxes and the Cannabis Business (a GVV case)

Hailey Declaire, a CPA, just sent the tax return that she prepared for a client in the marijuana growing and distribution business, Weeds R Us, to Harry Smokes the manager of the tax department. Harry had just fielded a phone call from the president of Weeds R Us who gave him an ear full because Hailey insisted on reporting all of the cash sales from the marijuana business on the 2019 tax return. Hailey arrives at Harrys office and the following conversation ensues.

Hailey, come in, Harry said. Thank you, Harry, Hailey responded. Do you know why I asked to see you? Im not sure. Does it have something to do with the tax return for Weeds R Us? asked Hailey. Thats right, answered Harry. Is there a problem? Hailey asked.

Harry answered: I just spoke with the companys president. He said you insisted on reporting 100% of the cash sales from the marijuana business. Hes upset. He wants to hold back 25% of that amount and figures no one will be the wiser because marijuana is a cash business. The company cant get a bank account in the state because, even though the cannabis business is legal in the state, it still is prohibited under federal law under the Controlled Substances Act.

Why would we risk our reputation by going along with the clients position? Hailey asked.

Its not that simple, Harry responded. The client needs an audit report under state regulations. We have been pushing hard to get that business. Its lucrative and may open the door to even more services including personal financial planning.

Harry knew he could simply change the tax return and submit it for the client. However, he wanted Hailey to get onboard because the firm intended to go after other clients in the marijuana business. So, Harry asked Hailey to

meet with him and the partner in charge of the tax practice first thing on Monday morning. Hailey says shell be

there and returns to her office.

Questions

Assume you are in Haileys position and answer the following questions.

1. Explain how social and organizational pressures might influence your position at Mondays meeting. 2. What role might cognitive dissonance play in developing your position? 3. Think of your response in the context of developing a script and consider the following:

• What are the main arguments you are trying to counter? That is, what are the reasons and rationalizations you need to address?

• What is at stake for the key parties?

• What levers can you use to influence those who disagree with you?

• What is your most powerful and persuasive response to the reasons and rationalizations you need to address? To whom should the argument be made? When and in what context?

• Please use the Integrated Ethical Decision Making Framework (EF) and the GVV model to analyze All cases.

• discuss the stage of moral development of the individuals in the case.