- 10 Marks
AAA – L3 – Q20 – Professional responsibility and liability
Discuss ethical and professional issues for MM & Co regarding client Pen Co's tax fraud investigation and Scot family's transactions.
Question
You are senior manager in MM & Co, a firm of Chartered Accountants. Recently, you have been assigned specific responsibility for undertaking annual reviews of existing clients. The following situations have arisen in connection with two clients.
(i) MM & Co was appointed auditor of Pen Co last year, and has recently issued an unmodified opinion on the financial statements for the year ended 31 March 2013. To your surprise, the tax authorities have just launched an investigation into the affairs of Pen Co on suspicion of under-declaring revenue. (7 marks)
(ii) Your firm has provided financial advice to the Scot family for many years and this has sometimes involved your firm carrying out transactions on their behalf. The eldest son, Gino, is to take up a position as a senior government official in a foreign country next month. (3 marks)
Required:
Identify and comment on the ethical and other professional issues raised by each of these matters and state what action, if any, MM & Co should now take.
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