John Rella is a long-time auditor of a medium-size public accounting firm that serves clients in the Miami area. He is auditing Green Market Vitamin Company for the fourth year in a row, but this year Green Market has a new CEO, who has an unusual style of doing business.

 Margarat Boracha, the new CEO, likes to drink and party, and she insists that topemployees and business associates drink and party with her. On the first day of the audit,she invites John to meet with her on her private yacht where she has her second office.He thinks nothing of it because he has met with clients on corporate yachts before.When John arrives at the yacht, he is in for a big surprise. Margarat is sitting outsideon the rear deck in a skimpy bikini, talking with two men in Spanish. She tries to introduceJohn to the men, but neither of them speaks English. John studied Spanish incollege, but he does not try to speak to them in Spanish for fear of showing his weakcommand of the language.A minute later a man appearing to be the captain (because of his white navy-styleclothes) calls Margarat to the front of the boat, leaving John alone with the two men.The two begin a heated conversation, but John simply stares out over the water, notletting on that he understands.John listens as one of the men begins to describe what sounds like a small airplane arriving from Cartagena. They speak in somewhat coded language, but it does not takehim long to figure out that they are speaking about a shipment of cocaine.The men leave as soon as Margaret returns. She then sits down with John and beginsspeaking about her company. She drinks a lot but does not push John to do the same. After a while, John finds she is not only charming but very knowledgeable about business,and he becomes convinced that she is a good leader and probably an effectiveCEO for Green Market Vitamin Company.John leaves the meeting with mixed feelings. On one hand, he would like to retain theengagement because Green Market has been a profitable client in past years and, underMargarat?s leadership, will probably add an extra six figures to his personal annual income. On the other hand, he is worried about getting mixed up with someone affiliated with drug dealers.

a. How should John handle the situation?

b. Should he confront Margaret with his concerns?

c. Should John go to the police?

d. Assume that this year is the first year that John is the auditor of Green Market Vitamin

Company. Does he need to issue a report if he walks away from Green Market?

What might such a report say?