Mike discovered Internal Revenue Service documents in Janets office that showed the company owed $200,000 in delinquent payroll taxes. Mike was surprised because the general ledger trial balance in the companys computer system showed no such payroll tax liability. He asked Janet for an explanation, and she responded as follows: Mike, do you remember one Friday afternoon on the 30th of the month several months ago when I called and asked if I could show a receivable as collected that the customer had mailed to me but that I wouldnt receive until Monday the 1st? I told you I could deposit that check Monday when I got it to cover the check to the CRA and since the 31st was on a weekend the tax payments wouldnt be late. You said it would be O.K. When I entered this into our system it occurred to me that I could show any receivable as collected and it would look like I have more money than I actually have. Well Mike, Ive been showing receivables as having been collected before they actually are and writing checks to the CRA but delaying the mailing of them ever since. Further, Mike knew Janet had done this with Dougs full knowledge. Mike confronted Doug about the matter, pointing out that the financial statements for the last several months were misleading and inaccurate. Doug became indignant that Mike would question his judgment. He pointed out that to disclose the liability would alarm the bankers and investors thereby jeopardizing the working capital loan being sought and, consequently, the companys future.(Janet Anderson took care of the main bookkeeping functions.Doug Bays, the CEO and largest stockholder)

Question: Do you think Mike(A CPA & a controller, stockholder of the company) was exposed to any personal liability for his association with the financial statements of SmartTool regarding either the payroll tax issue or the questionable invoicing issue? Was it either Janet or Doug? Refer to sections on contract law and fraud in a business law text to help you with your answer.