ACCA Advanced Taxation (ATX) Practice Exam

A conflict of interest may arise if which scenario occurs?

1. Serving two clients with opposing goals

2. Acting as a sole practitioner

3. Giving tax advice to only one client

4. Managing a single project

The correct answer is: Serving two clients with opposing goals

A conflict of interest arises in a situation where a professional serves two clients with opposing goals. This scenario creates a potential dilemma because the interests of one client may negatively impact the other client, leading to challenges in maintaining impartiality and loyalty to both parties. Ethical standards in the profession emphasize the importance of ensuring that a professional's duty to one client does not compromise the service provided to another, particularly when the objectives of these clients are directly conflicting. In contrast, acting as a sole practitioner, giving tax advice to only one client, or managing a single project does not inherently create conflicting interests since these situations typically involve focusing on one set of goals or obligations. Therefore, the likelihood of a conflict arising is significantly lower in these scenarios compared to serving two clients with opposing goals. This is why serving two clients with conflicting interests is the correct answer when identifying a potential conflict of interest.