ACCA Advanced Taxation (ATX) Practice Exam

What should the firm do if Hogan joins as a partner regarding a conflict of interest?

1. Ignore the potential conflict

2. Inform only Olma of the conflict

3. Obtain permission from both Hogan and Olma

4. Resign from acting for both parties

The correct answer is: Obtain permission from both Hogan and Olma

When a new partner, such as Hogan, joins a firm where there is a potential conflict of interest, it is crucial to handle the situation with transparency and integrity. Obtaining permission from both Hogan and Olma is essential because it ensures that both parties are aware of the conflict and consensual in continuing their professional relationship despite the potential issues. This approach upholds ethical standards and complies with regulatory requirements, which often mandate firms to manage conflicts of interest proactively. By obtaining permission, the firm demonstrates that it is acting in the best interests of its clients while also respecting the new partner’s autonomy and involvement in the firm. Moreover, simply ignoring the potential conflict can lead to reputational damage and legal ramifications if either party feels that they were not properly informed or that their interests were compromised. Informing only Olma would be insufficient as Hogan also needs to be part of the conversation to maintain transparency and trust within the partnership. Resigning from acting for both parties could be an extreme measure that may not be necessary if proper permissions are obtained, and it could also lead to a loss of business and client relationships. Therefore, the most appropriate and ethical course of action is to obtain permission from both Hogan and Olma. This ensures that all parties are on