BAW4624 Tax Compliance_Ethics

Question 1

You work as a trainee at PC & Co, a firm of ICAEW Chartered Accountants.

Happy Sdn Bhd.

Sunil is the managing director of Happy Sdn. Bhd. which has been a tax client of PC & Co
for a number of years. Sunil has just sent your manager, an ICAEW Chartered Accountant
who is in charge of the Happy Sdn. Bhd. tax engagement, the following email:

I know that you don’t normally act for me personally but I’d really appreciate it if you could
find time to prepare my wife’s tax return and disclosure to the IRBM. The current
accountants we use have been next to useless.

I have faith in PC & Co and am sure you will be able to deal with it. If so, we’ll be able to
negotiate a good fee as after all I’m the person who decides how contracts are awarded at
Happy Sdn. Bhd.

Requirements

Explain the ethical issues your manager should consider before replying to Sunil’s email.

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Question 2

You work for C.L Yew & Co, a firm of ICAEW Chartered Accountants, which has been
engaged by Starmart Sdn. Bhd. for many years to perform accounting and corporation tax
work. In your review of Starmart Sdn. Bhd. financial records, you have discovered that the
tax liability of the company has been understated. The fees paid for accounting related jobs
by Starmart Sdn.Bhd. is approximately 20% of C.L.Yew & Co. total revenue.

Requirements

i) Identify the issue(s) in the above scenario.

ii) Explain the types of threat to fundamental ethical principles faced by C.L Yew & Co
and identify which of the fundamental ethical principles are most threatened.

iii) State the actions to be taken by C.L Yew & Co in relation to the issue stated in the
above scenario.

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Question 3

You are a trainee ICAEW Chartered Accountant working as an employee for Pigeon Bhd in
its
finance department. You identified errors in the corporation tax return for the year ended 31
December 2020 which was filed on 31 December 2021. At your weekly progress meeting
with your manager, you raised the errors as an issue. Your manager is also an ICAEW
Chartered Accountant.

In the meeting your manager made it clear that her main concern was that if the errors were
disclosed she would lose her job. She asked you not to discuss the errors with anyone else,
explaining that the errors had caused only a small underpayment of tax overall. If you did
disclose the errors she said she would ensure that it had long-term implications for your
career.

Requirements

i) In relation to your manager’s behaviour towards you at the meeting, identify which
type of threat to the fundamental ethical principles arises here and explain which two
of the five fundamental ethical principles are most threatened.

ii) Discuss whether non-disclosure of the errors amounts to tax evasion.

iii) Assuming it is tax evasion, explain the potential implications for you under the anti-
money laundering regulations if you fail to disclose the errors.

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Question 4 (PYQ 2019)

Ahmad is an ICAEW Chartered Accountant working as a senior tax adviser for a firm of
accountants. He had a meeting with Seng Joo, a potential new client who has an
unincorporated business. Seng Joo plans to expand his business. He is not satisfied with the
services provided by his current tax adviser. As such he approaches Ahmad’s firm to ask
them to be his new tax adviser.
Required:
Identify two fundamental principles that Ahmad’s firm should consider. Explain the
procedures that Ahmad‘s firm should follow before they accept Seng Joo as their new client.
(Total: 7 marks)

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Question 5 (PYQ 2020)

You are an intern for Morris & Co, an ICAEW Chartered Accountants firm. This firm was
founded by Mr Morris in 1980. You have been assigned to handle the payroll for Kenneth
Sdn. Bhd. In your review of Kenneth Sdn. Bhd. payroll practices, you discovered that the
company has omitted many taxable benefits of its managing director, Mr Kenneth Lee, when
filing Form E (form which provides employee’s particulars to IRB by employer) to Inland
Revenue Board. Upon checking, you found that the omission is under the instruction of Mr
Kenneth Lee himself. Kenneth Sdn.Bhd. is a big client to Morris & Co. and Mr Kenneth Lee
is a close friend to Mr Morris.

Required:

i) Based on above scenario, is Morris & Co. currently facing any threat(s) to
fundamental ethical principles? Discuss.
(3 marks)

ii) Suggest the course of actions which should be taken by Morris & Co. in relation to
the issue that you have discovered.
(4
marks)
(Total: 7 marks)

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Question 6 (PYQ 2021)

You work with TnT & Co, an ICAEW Chartered Accountants firm as a tax consultant. Jason,
who is your new firm’s client, approached you to help him with his tax calculation. Jason
claimed that in the last year, 2019, he had to pay high tax amounts, although his business did
not do well. Therefore, in 2020, he is seeking your professional advice in order to reduce his
tax liability.

Required:

Based on above scenario, explain:

i) the procedures that you should consider when accepting a new client.
(3
marks)

ii) TWO (2) standards that you should observe when advising a client on tax planning.
(4
marks)

(Total: 7 marks)