ACCA Advanced Taxation (ATX) Practice Exam

What should a firm observe when advising a new client based on its previous experiences?

1. Collect personal data from past clients

2. Ensure client confidentiality

3. Share past cases for better advice

4. Maximize fees from the client

The correct answer is: Ensure client confidentiality

When advising a new client, it is crucial for a firm to ensure client confidentiality. This principle is fundamental in maintaining the trust and integrity of the advisor-client relationship. Confidentiality is not just an ethical obligation but often a legal one as well, particularly within the framework of professional services like taxation and financial advising. Ensuring client confidentiality means that any sensitive information shared by clients is protected and not disclosed to unauthorized parties. This builds a strong foundation for the client relationship since clients can feel secure in knowing that their personal and financial information will be handled with care and discretion. While collecting data from past clients or sharing past cases might seem beneficial for providing informed advice, such actions could violate confidentiality agreements or reveal sensitive information. Likewise, maximizing fees from a client, though it may be a business objective, does not reflect the core ethical obligation to protect client interests and privacy. Keeping client data confidential reinforces the firm's reputation and can lead to referrals and long-term relationships, which are more valuable than any immediate financial gain.