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Week 3 Tutorial 3 Questions

This document contains 8 questions from an ICAEW past exam on business and corporate taxation. The questions cover topics related to ethics and law, including client confidentiality, conflicts of interest, money laundering, tax evasion, threats to independence, anti-money laundering procedures, tax planning schemes, and standards for tax planning from ICAEW's Professional Conduct in Relation to Taxation manual. The questions present various scenarios that tax accountants may encounter and require identifying appropriate actions and ethical standards.

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33 views

Week 3 Tutorial 3 Questions

This document contains 8 questions from an ICAEW past exam on business and corporate taxation. The questions cover topics related to ethics and law, including client confidentiality, conflicts of interest, money laundering, tax evasion, threats to independence, anti-money laundering procedures, tax planning schemes, and standards for tax planning from ICAEW's Professional Conduct in Relation to Taxation manual. The questions present various scenarios that tax accountants may encounter and require identifying appropriate actions and ethical standards.

Uploaded by

umstudy
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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CIA2006 Business and Corporate Taxation

Tutorial 2 Ethics and Law

Question 1
You have prepared tax returns for Grimco Sdn Bhd for the last two years. LHDN makes an informal request for certain
information you hold about your client, over and above what was in the last tax return. You ask Grimco Sdn Bhd’s directors for
permission to forward this information to LHDN, but they refuse. A few weeks later, LHDN issues a statutory demand for the
information. You inform Grimco Sdn Bhd’s directors and again they ask you not to disclose the information.

Requirement
Explain how confidentiality applies at each stage in this scenario.

Question 2
Jasmine is a professional accountant working in the tax department of a large accounting firm. An ethical issue has arisen
regarding one particular client, an ongoing personal disagreement which Jasmine considers threatens her objectivity and
possibly her professional behaviour. Jasmine has followed the suggested procedure for conflict resolution including speaking to
her line manager. She has been advised to see how the relationship with the client goes over the next few months, a particularly
busy time for the firm, and take care to be polite to the client. Jasmine is concerned that the conflict remains.

Requirement
Outline five options open to Jasmine in this situation.

Question 3
LHDN have issued a repayment of RM2,000 in error to your client Mr Nott. You have asked Mr Nott’s permission to alert
LHDN to this and advised him to return the repayment, but Mr Nott is determined to keep the payment and will not authorise
you to contact LHDN regarding it. Unfortunately, the engagement letter is silent on the matter of LHDN errors. Mr Nott is keen
to forget about the repayment and would like you to begin work on his next tax return.

Requirement
Outline the steps you would take next as a professional accountant.

Question 4
Peter is a junior accountant working at Figg & Co. He joined last year and underwent anti-money laundering training when he
started his job, a one-day course organised for him by the Compliance Officer, Milo. Despite this, Peter failed to notice a
significant money-laundering cash transaction carried out by a client whose tax return he was working on. Peter
therefore made no report.

Requirement
Explain whether Peter and/or Milo have committed an offence here and if so, whether there is any defence available

Question 5
Your firm has recently started acting for a client XYZ Sdn Bhd, preparing their sales tax returns. You notice that in the
previous sales tax return prepared by the financial controller of XYZ Sdn Bhd, there is a small mistake understating the
sales tax due to Royal Customs. When you explain this to the financial controller, she understands the problem. However, she
says that because she did not know the correct sales tax treatment when she submitted the return, the company cannot have
done anything wrong, and the mistake is only small anyway. She says to ignore it and just prepare future sales tax
returns correctly.

Requirement
Explain whether non-disclosure of the mistake will constitute tax evasion.
Question 6
You are a chartered accountant working for a firm. Whilst performing tax work at Marquez Sdn Bhd, an audit and tax client
of your firm, you were approached by Karen, a member of the finance department. Karen is a trainee Chartered
Accountant, who recently noticed that a large amount was entered into Marquez Sdn Bhd’s cash account as a sales tax receipt.
This was an unusual transaction as Marquez Sdn Bhd usually pays sales tax to Royal Customs. Karen asked the finance
director, Craig, if she could look at the bank statements to verify the receipt. Karen told you: “I am not convinced that this
receipt relates to sales tax. Craig became annoyed when I asked about the transaction and told me not to worry about it.
He did not show me the bank statements and insisted that I must not mention this to any other member of staff, as it relates to a
project that is not yet public knowledge. He warned me that any breach of trust could have a negative impact on my career at
Marquez Sdn Bhd.”

Requirements
Identify the threats faced by Karen as a result of her conversation with Craig, and explain the actions that both you and your
firm may need to take as a result of this disclosure by Karen.

Question 7
You work for a Chartered Accountants firm and are currently helping the compliance officer (CO). You have been asked to
look at the following three issues received by email from colleagues:
 One of the managers in the tax department emailed to let you know that there is a new client, Daveth Tarly. The manager
asked what actions need to be taken by your firm in relation to anti-money laundering procedures for Daveth.
A new trainee, Romesh, is concerned about some unusual transactions on a client’s bank account. Romesh asked both
as enior colleague and the client about these transactions but was not satisfied with the answers. Romesh intends to
discuss these transactions again with the client in the next couple of days. He is also concerned about any consequences for
himself if he does not deal with this matter correctly.
The firm’s Data Protection Officer believes that too much information is being kept about former clients. He asked that all
records relating to former clients, including records of client identification, be destroyed.

Requirement
Explain the correct anti-money laundering procedures to be undertaken in each of the three situations, and state any actions
that should be taken by the CO.

Question 8
John is an ICAEW Chartered Accountant working as a senior tax adviser for a firm of accountants. John has created a
new tax planning scheme which he intends to promote to non-Malaysian domiciled individuals. John’s scheme can be promoted
to all non-Malaysian domiciled clients without the need to tailor it to their individual needs. The scheme utilises a previously
unexploited loophole in tax legislation by implementing a number of highly contrived and artificial steps. In his research
John has discovered that:
although LHDN’s interpretation of the relevant tax legislation is contrary to what the scheme proposes, LHDN’s interpretation
has never been tested before the Courts and is not specifically supported by the legislation, and
while the relevant tax legislation does not specifically deal with this exact situation, it is clear that this scheme would
be contrary to what Parliament intended when the legislation was enacted. John disagrees with LHDN’s interpretation and
therefore does not intend to explain to potential clients that the scheme might be challenged by LHDN. Laura, John’s manager,
and the firm’s managing partner, has reviewed the scheme. She has concluded that its promotion by an ICAEW member
could put that member in conflict with the Standards for Tax Planning included in Professional Conduct in Relation to
Taxation (PCRT).

Requirement
Identify and explain three Standards for Tax Planning from PCRT which best support Laura’s conclusion.

* all questions adapted/adopted from ICAEW past exam questions/manual

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