View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Liberty University Digital Commons DESIGNING A FRAMEWORK FOR MAINTAINING GOOD MORAL CHARACTER WHEN PROVIDING ACCOUNTING SERVICES TO THE LEGAL CANNABIS INDUSTRY by Alice Guy Azzaro Doctoral Study Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Business Administration Liberty University, School of Business December 2018 Abstract Cannabis, once delegated to transactions in the shadows and the constant threat of criminal prosecution, has emerged as a booming industry as states continue to legalize it for medical and recreational use. Federal lawmakers have yet to bless the use of cannabis through legislation, so the threat of criminal penalties looms for both cannabis businesses and the businesses that support them, such as CPA firms. State legalization has brought forth an industry that once operated under the radar into the light of legitimacy. With legitimacy comes the obligation to both report and pay taxes at the federal, state, and local levels. Yet, CPAs, conservative by nature, have reasonable objections to offering these services. Both national and state CPA associations require CPAs have good moral character, but providing services to a federally- illegal business has always stood as a violation of that mandate. This qualitative, multi-case research study using semi-structured interviews of CPAs serving the cannabis industry and CPAs that have elected not to serve the industry provides insights into the concerns regarding engaging legal cannabis clients and a framework to protect good moral character when serving the cannabis industry. The framework consists of two parallel paths, due diligence and due care. Due diligence is the processes undertaken to ensure a thorough understanding of the client. Due care is the processes that support protecting both the client and the firm. Keywords: legal cannabis, good moral character, CPA, due diligence, due care Dedication This research study is dedicated to my parents, Wynne and Dean Guy, for always believing in me; to my children, Lucas, Marcus, Nicholas, and Anthony, and my grandchildren, Layla, Zoey, Skylar, and Joey, who continue to inspire me; and to my Lord and Savior, Jesus Christ, who never gives up on me. I would also like to dedicate this work to my friends, Dr. Victoria Holroyd and Dr. Ruthy Watson, who showed me that you are never too old to reach for the stars. Acknowledgments First and foremost, I wish to acknowledge that God brought me to this endeavor, carried me through the challenges, and pushed me over the finish line. Without His constant faithfulness, my efforts would have been inadequate. If there are fruits of this labor, let them inure to His glory. Words cannot express my gratitude to Dr. Stacie Rhodes and her willingness to step up when others stepped down. She went above and beyond to ensure my success. I would also like to thank Dr. Moore for his indefatigable cheer and optimism that lifted me in difficult times. I would also like to thank Ben Stein for his words to me that brought me to Liberty in the first place. Lastly, I wish to thank my beloved cohort of likeminded peers that became friends, then family, on this journey. Without their love, without their laughs, without their wisdom, I know not where I would be in this process. They are truly amazing and special people I am honored to know. Table of Contents List of Figures ............................................................................................................................... vii Section 1: Foundation of the Study ................................................................................................. 1 Background of the Problem ...................................................................................................... 1 Problem Statement .................................................................................................................... 4 General problem.................................................................................................................. 4 Specific problem ................................................................................................................. 5 Purpose Statement ..................................................................................................................... 6 Nature of the Study ................................................................................................................... 6 Research Questions ................................................................................................................... 8 Conceptual Framework ............................................................................................................. 9 Theory ............................................................................................................................... 10 Concepts and themes......................................................................................................... 10 Environment ...................................................................................................................... 10 Considerations................................................................................................................... 11 An overview of existing good moral character standards ................................................. 13 Terms ...................................................................................................................................... 13 Assumptions ............................................................................................................................ 15 Limitations .............................................................................................................................. 15 Delimitations ........................................................................................................................... 16 Significance of Study .............................................................................................................. 16 Improved business practices ............................................................................................. 16 Implications for biblical integration .................................................................................. 17 i A Review of the Professional and Academic Literature ......................................................... 20 Business Problems .................................................................................................................. 21 Technical issues facing CPAs in the legal cannabis industry ........................................... 21 Tax .............................................................................................................................. 21 Attestation ................................................................................................................... 23 Ethical issues facing CPAs in the legal cannabis industry ............................................... 24 Federal issues .............................................................................................................. 24 State issues .................................................................................................................. 25 Federal law supremacy ............................................................................................... 26 Potential harm ............................................................................................................. 26 Cannabis businesses and society ........................................................................... 27 CPAs ..................................................................................................................... 28 Moral guidance ........................................................................................................... 28 External moral guidance ....................................................................................... 28 Internal moral guidance ......................................................................................... 29 Dealing with ethical conflict to reduce risk when making business decisions ........... 30 Best practices .............................................................................................................. 32 Due diligence ........................................................................................................ 32 Compliance ........................................................................................................... 33 Other safeguards .................................................................................................... 33 Foundations of Moral Character ............................................................................................. 35 Moral character defined .................................................................................................... 35 Philosophers ................................................................................................................ 37 ii Socrates ................................................................................................................. 37 Plato....................................................................................................................... 37 Aristotle ................................................................................................................