ACCA Advanced Taxation (ATX) Practice Exam

What is a potential consequence for a firm if it chooses not to act for a client engaged in tax evasion?

1. The firm may lose other clients

2. The firm must notify HMRC but can keep the client

3. The firm must provide reasons for ceasing to act

4. The firm maintains its integrity and professional behavior

The correct answer is: The firm maintains its integrity and professional behavior

Selecting to not engage with a client involved in tax evasion is a decision that ideally aligns with maintaining integrity and upholding professional ethics. By refusing to act for such a client, the firm demonstrates its commitment to ethical standards and the law, thus reinforcing its reputation as a trustworthy and responsible entity within the financial and tax advisory landscape. This course of action reflects the firm's dedication to compliance with tax regulations and professional conduct guidelines, which can be critical for maintaining its license to operate and its standing in the community. Furthermore, it underscores the importance of promoting a culture of integrity within the profession, suggesting that the firm prioritizes lawful behavior over pursuing potentially profitable but unethical engagements. Such a stance not only safeguards the firm’s reputation but also serves as an ethical benchmark in the industry. In this context, while there may be risks associated with losing clients or having to explain its decision to cease acting for the client, the overarching benefit of maintaining integrity and professional behavior is substantial and can have long-term positive effects on the firm's standing and trustworthiness.