ACCA Advanced Taxation (ATX) Practice Exam

What should be done if the conflict of interest cannot be reduced to an acceptable level?

1. Continue without making any changes

2. Consider resigning from one engagement

3. Only inform Olma about the conflict

4. Change the client engagement team

The correct answer is: Consider resigning from one engagement

In situations where a conflict of interest arises and cannot be mitigated to an acceptable level, the best course of action is to consider resigning from one engagement. This approach is rooted in ethical standards and professional integrity, which prioritize the maintenance of impartiality and trust. When a conflict cannot be resolved, continuing without changes could compromise the quality of the service provided, potentially leading to biased outcomes or damaging relationships with clients. Informing only one party about the conflict may not adequately address the situation, as it does not resolve the underlying issue affecting multiple interests. Changing the client engagement team might be a temporary solution, but it doesn't fully eliminate the conflict if underlying interests or relationships remain the same. By resigning from one of the conflicting engagements, the professional upholds ethical standards and reinforces their commitment to objectivity, ensuring that they can serve their clients without the risk of divided loyalties or compromised judgment. This decision emphasizes the importance of trust and transparency in professional relationships, which is crucial for long-term success and reputation in the field.