Dan works for a small public accounting firm (15-20 personnel, 3 partners) primarily performing tax preparation and small business consulting as an entry level staff associate. He has been on the job for just over 2 years. He just passed the last section of the CPA exam, and is getting married in the fall. He likes his job, is accomplishing all of his assignments, and is progressing rapidly in the level of responsibility within the firm. Richard, the managing partner of the firm has just assigned Dan to work on a new big client, Delta House, LLC (Delta House). Delta House is a well-known regional property developer that specializes in building homes for upscale, young professionals in the greater North Shore region. Skip, the owner of Delta House and Richard are old friends and former college roommates, and Dan is told to give the account special attention and priority. As Dan begins the engagement he is introduced to Delta House controller, Chad, who happens to be Skips son. Chad is a newly licensed CPA, just a few years older than Dan, and is a very likable person. Over the course of time Dan becomes friends with Chad, views him as a professional mentor, and they begin to attend social functions together outside of work. At first there does not seem to be any problem, but over time Dan notices that Chad parties pretty hard. When they are out Chad tends to pick up the tab, and even comments hey, its deductible. As Dan is working on the Delta House accounts tax preparation he notices that there are many expenses in the books from the bars and restaurants that he and Chad had frequented. Dan knew there was absolutely no business purpose to any of their outings. Concerned, he digs a little deeper into the books and finds additional expenses that do not seem to belong on the company books. He asks Chad about the expenses, and Chad just says hey Im doing business all the time, and those are just out of pocket costs that I have been reimbursed for. Dan notes that one of the expenses was for a weekend trip to Las Vegas. Dan knew Chad was on vacation over that weekend and that much of the actual expense was for alcohol and gambling.

Dan is sitting at his desk thinking about how to handle the situation. He knows that Richard and Skip are close, and he also knows that he wants to make sure he is able to afford his upcoming wedding to his girlfriend Elise, and that he needs his job

question

What about if, instead of the above, Chad invited Dan to one of Delta Houses newly-built model homes in Topsfield? When Dan arrived, he saw a number of cars parked along the street and Chad floating in the pool, surrounded by a group of people in their late-20s. A table off to the side had a glass bowl full of Ziploc bags, and an engraved sign perched on a small statue of a cowboy riding a horse that said MOLLY UP! Chad looked up, said yo! Danny boys here! and preceded to tell Dan that he was throwing a party to celebrate his 30th birthday. Dan wondered if it was appropriate to use one of the company houses for a party, to which Chad replied come on man, its fine. Im going to expense the whole party anyway, because some of these people might actually buy one of our houses. How should Dan handle this situation?