Julia Hoben had graduated from a college business program with a major in accounting. She designed her program so that it enabled her to obtain a Chartered Professional Accountant (CPA) designation within two years. She was employed as an accountant with a regional school board and she was enjoying the work.

Recently, her uncle asked if she was interested in doing some accounting for his restaurant. Julia first thought about this as moonlighting, of which her employer might not approve. She checked her employer's policy hand-book and did not find any mention of moonlighting.

Julia had learned in a Human Resources course about moonlighting and the issues involved. Moonlighting, or outside employment, is defined as paid work in which an employee engages outside of the normal working hours of his or her primary job. The most common reason for engaging in such activity is to earn extra money to pay expenses, reduce debt, or save. Individuals also do it to gain experience, improve their skills, start small businesses, and simply because they enjoy it.

Employers are concerned about the possible interference with job performance and conflicts of interest. Moonlighting may result in employees being stressed or fatigued, reducing productivity. It could involve the inappropriate use of company resources, for example communications, computers, and copying facilities. Conflicts of interest can arise, especially if the work being performed is the same and in the same industry. Conflicts also occur when personal interests resulting from moonlighting clash with the interests of the employer who expects employee loyalty. As a result, employers often require that employees disclose outside employment. From a societal perspective, moonlighting is perceived as taking jobs that could be filled by unemployed persons, and governments are concerned about tax evasion.

Her uncle assured her that he needed Julia's services for a maximum of three hours a week and would pay her an hourly rate. Julia would not be performing bookkeeping tasks, because her aunt looked after that aspect. Her uncle wanted Julia to look after the various tax filings for the provincial government and the Canadian Revenue Agency (CRA) as the filings would be considered more reliable if prepared by someone with a professional accounting designation. Julia concluded that there was no conflict between working for a school board and in the restaurant industry, and agreed to the offer. She did not feel it necessary to inform her employer.

During the first months, Julia experienced several complications in this part-time employment. Her first concern was prompted when her uncle paid her in cash for the first two weeks of work. At first, Julia did not think much about this, but upon further reflection she acknowledged that cash payments to employees or suppliers in the restaurant industry was a possible approach to avoiding taxes.

Things got more complicated in the following weeks. The restaurant used a POS (point of sale) computerized system to record sales according to whether they were credit card or cash, and summarized sales by menu items and waiter. Julia reviewed the reports from this system in preparing taxation returns. She noticed that daily cash versus credit sales fluctuated greatly and more than would be expected. Also, she found two POS reports for the same day with differing totals.

Julia had read newspaper articles about tax avoidance in the restaurant industry. In fact, CRA had conducted an extensive investigation into tax fraud in the industry. One practice involved the use of "zapper" computer software to delete specific data, for example cash sales or employee hours. This practice was difficult to detect because a stand-alone software application was used that was contained on a CD or memory stick.

This situation placed Julia in a difficult position. First of all, family was involved and it would harm family relationships if she reported the practice to the taxation agencies, or if she even mentioned it to her uncle. Besides the personal dilemma, there was also a professional one. As a member of Chartered Professions Accountants she had to follow its ethical principles and rules of conduct. She was not allowed to provide services that could be unlawful, to present financial information that was misleading, or to be associated with any reports or statements she knows are false.

These principles and rules seemed very clear to Julia. Her conscience would not allow her to sign a taxation return when she suspected fraud. Julia felt very alone as she was not sure with whom she could discuss this matter, and more importantly, what she should do.

Question:

1) Why do you think Julia should report it to the authorities?

2) Why do you think this is the ethical decision to make, considering Julia's position?