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CBE ATT Ethics > Question Bank 1 > Flashcards

Question Bank 1 Flashcards

1
Q

Which three of the following statements correctly describe the Fundamental Principle of Integrity?

A

A member must not knowingly fail to provide relevant information.

A member must not obtain work in any unprofessional manner

A member must not knowingly make any statement which is misleading.

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2
Q

Which one of the following statements regarding the responsibility of CIOT and ATT members is correct?

A

A member is responsible for their own work and that of their employees and subcontractors.

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3
Q

Choose the correct option to complete the following statement.

The definition of pro bono work according to the Professional Rules & Practice Guidelines is work carried out for….

A

Absolutely no payment

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4
Q

A member must not perform their professional work improperly to such extent as to bring discredit to which of the following?

A

The CIOT or ATT

Themselves

The tax profession

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5
Q

Which one of the following is not a Fundamental Principle which members of the CIOT and ATT must comply with?

A

Courtesy

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6
Q

In the Professional Rules & Practice Guidelines (PRPG), there is five fundamental principles applicable to all members.

Choose the correct option following the statement.

A member must take due care in their professional conduct and professional dealings according to the Fundamental Principle of….

A

Professional behaviour

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7
Q

In which of the following circumstances must a member inform the CIOT/ATT?

1) They are notified of a disciplinary action upheld against them by another professional body to which they belong
2) They are charged with a criminal offence
3) They are subject to a bankruptcy order

A

All of them

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8
Q

Which one of the following is not a Fundamental Principle?

A

Consideration

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9
Q

A member carelessly provides HMRC with incorrect information about their client.

Choose the correct option to complete the following statement.

This is a breach of the Fundamental Principle of…

A

Professional behaviour

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10
Q

Engagement letters for Tax practitioners contains guidance in respect of the engagement letter pack.

Which three of the following form part of the engagement letter pack?

A

Covering letter
Standard terms and conditions of business
Cancellation notices for consumers

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11
Q

A member may delegate work to a subcontractor

Which one of the following statements is correct?

A

The member is primarily responsible for the work

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12
Q

When deciding on the form of advice to provide to a client, which three of the following factors must a member consider?

A

The need to seek other professional advice
The tax sophistication of the client
The technical complications presented

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13
Q

Which of the following statements about regulated investment business activities are correct?

1 - A member who is with a firm which is not authorised by the Financial Conduct Authority (FCA) and is not a member of a Designated Professional Body can advise in general terms on the benefits of setting up a pension.

2 - A member who is with a firm which is authorised by the FCA and who is an Approved Person can make specific product recommendations.

A

Both 1 & 2

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14
Q

In acting for a new client, a member should consider whether the potential client will be acceptable in terms of risks for the practice.

In assessing the risks, which three of the following should the member consider?

A

Personal circumstances of the client
Financial standing of the client
Attitude to disclosure in regard to compliance with tax law

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15
Q

The guidance on practice governance in the Professional Rules and Practice Guidelines recommends that members have in place a business continuity plan in case of which one of the following?

A

In the event of a serious incident, such as fire, flood or major IT systems failure

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16
Q

Identify whether each of the following statements are true or false about regulated investment business activities.

Please note FSMA 2000 is the Financial Services and Markets Act 2000.

A

True
The Law Society is a Designated Professional Body under FSMA 2000

False
Membership of the CIOT automatically give authority to provide any of the services regulated under FSMA

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17
Q

Cindy, a sole practitioner, has had a serious accident which has left her unable to continue her business.

Cindy had previously arranged with Salim, another sole practitioner, to take over the running of the business should she become permanently incapacitated.

Identify whether each of the following statements are true or false

A

True
A written agreement should provide details of the duration of Salim’s responsibilities

False
Cindy must have granted Salim power of attorney

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18
Q

Carlos, a member of the ATT, ceased to act for Harriet over a year ago.

Carlos wrote to HMRC at the time of disengagement to inform them he was no longer acting for Harriet, but he has just received a communication from HMRC relating to Harriet.

Which one of the following actions should Carlos take?

A

Forward the letter to Harriet

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19
Q

Identify whether each of the following statements are true or false with regards to holding clients’ money.

A

Both TRUE

A member should give very careful consideration before agreeing to hold clients’ money.

Clients’ money must be kept separate from money belonging to the firm and kept in a separate client account.

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20
Q

Identify whether each of the following statements are true or false when considering the basis of charging for services.

A

Both TRUE

Where the member charges on the basis of time spent, an enhanced rate can be charged for urgent deadlines.

Indicative fees should be given before work is started.

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21
Q

In certain circumstances, a member in practice who acts for a client may cease to act for that client before the work has been completed

Which three of the following statements are correct?

A

They can cease if the client requires them to do so

They can cease provided they give reasonable notice of their intention to do so

They can cease because of legal or professional obligations

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22
Q

Tomasz is a member working in practice.

Tomasz prepares personal tax returns for Cara.

In order to help her cash flow, Cara settles her fees by making monthly payments on account

Regarding this arrangement, identify whether each of the following statements are correct or incorrect

A

Correct:
Any circumstances in which fees may become repayable should be set out in the letter of engagement

Incorrect:
Fees of this type may not be covered by professional fee insurance, as there is less risk of loss

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23
Q

A member may receive an information request from a third party.
Which two of the following statements are correct?

A

The client’s permission is not required if the request is legally enforceable and overrides client confidentiality

If the client refuses permission to disclose, the member should consider obtaining specialist advice

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24
Q

Sima, a newly qualified CTA, is creating a website advertising her tax-planning services

In relation to any use by Sima of the CIOT coat of arms and/or logo on her website, which one of the following is true?

A

Sima may not use the coat of arms, but may use the logo provided she has the CIOT’s permission

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25
Q

There may be times when a member employed in a professional practice finds themselves in a situation that threatens their compliance with the Professional Rules and Practice Guidelines

Which two of the following should the employed member do in this situation?

A

Disassociate themselves from the matter

Consider seeking alternative employment

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26
Q

Alison, a CTA, has concerns about some work she has been asked to do by her employer company.

Alison believes it could be contrary to the rules set out in Professional Rules and Practice Guidelines (PRPG) for members employed in commerce and industry (C&I).

Which one of the following is not a course of action recommended by RPG guidance in this situation?

A

Alison’s first action should be to immediately cease her employment

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27
Q

A professional indemnity insurance policy may include an excess
Choose the correct option to complete the following statement.
According to the Compulsory Professional Indemnity Insurance Regulations, the maximum level of excess permitted is…

A

£20,000 per principal

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28
Q

Which of the following activities could meet the requirements for Continuing Professional Development (CPD) purposes?
1. Attending a branch talk
2. Listening to a tax podcast
3. Reading technical journals, such as Tax Adviser

A

All of them

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29
Q

The Continuing Professional Development (CPD) Guidance notes set out the CPD requirements in three steps.

Which one of the following correctly summarises the three steps?

A

Planning, Undertaking, Outcome

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30
Q

Which one of the following statements is correct concerning professional indemnity insurance?

A

Where the gross fee income is less than £400,000 there may be lower levels of cover

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31
Q

Jonah, a CTA, works in taxation

Jonah also has a qualification allowing him to give certain financial advice, which has its own requirements to keep his knowledge up to date.

Jonah is wondering whether it is possible to undertake any CPD activities which will count for both the professional bodies he belongs to

Identify whether each of the following statements are true or false

A

True:
Some of Jonah’s CPD as a CTA may be fulfilled by updating himself on financial services

False:
Jonah must use the form provided by the CIOT to record all CPD he considers relevant to his work

32
Q

The purpose of Professional Conduct in Relation to Taxation (PCRT) and its associated help sheets is to assist and advise members on their professional conduct in relation to taxation

With regard to PCRT, identify whether each of the following statements are true or false

A

In particular, PCRT applies in respect of the tripartite relationship between a member, client and
HMRC

PCRT consists of the Fundamental Principles and the Standards for Tax Planning

33
Q

With regard to the Fundamental Principle of Professional Competence and Due Care, which three of the following statements are correct?

A

A member is free to choose whether or not to act for a client both generally and as regards specific activities

A member must carry out their work with a proper regard for technical and professional standards expected.

On occasions, there may be more than one tenable interpretation of the law. Each case should be considered on its own individual facts and circumstances.

34
Q

One of the Standards for Tax Planning is ‘Advising on tax planning arrangements’

Identify whether each of the following are true or false with regard to what the member should include in their client advice where a member has a genuine and reasonable uncertainty as to whether particular planning is in breach of this Standard.

A

Both TRUE

An assessment of the relevant disclosures that should be made to HMRC to enable it to make any reasonable enquiries.

An assessment of uncertainties and risks involved in the planning.

35
Q

Which two of the following statements are correct concerning confidentiality?

A

It is rigorously safeguarded by the courts

It may be overridden in limited circumstances

36
Q

Shana is undertaking tax planning for a client

She is confident that the planning is lawful based on the circumstances, but is aware that HMRC has taken a different view of the legislation.

Which one of the following statements is correct?

A

Shana must draw her client’s attention to the fact that HMRC could take a different view.

37
Q

There is an error in a client’s tax affairs which is not trivial.

Specific authorisation by the client is required for the member to disclose it to HMRC.

Assuming the client refuses to authorise disclosure, at what stage must the member cease to act?

A

After written advice on the consequences is given by the member.

38
Q

Identify whether each of the following statements are true or false with regard to materiality

Note - GAAP standard for Generally Accepted Accounting Principles

A

True:
Whether an amount is to be regarded as material depends upon the facts and circumstances of each case.

False:
The application of GAAP extends beyond the accounting profits, meaning materiality can be applied for tax filings.

39
Q

According to Professional Conduct in Relation to Taxation (PCRT), in which three of the following situations would a member need to consider additional disclosure?

A

The filing relies on a valuation

There is doubt about the correct treatment of an item

The amount of tax at stake is significant.

40
Q

Identify whether each of the following statements are true or false with regard to tax planning and tax evasion

A

A member can act for a client who is rectifying their affairs after they have evaded tax in the past.

Tax planning is legal

41
Q

HMRC has sent an over-repayment of tax to Sacha Brown, a CTA, in respect of one of her personal tax clients.

Which one of the following statements is correct?

A

Sacha must return it to HMRC as soon as practicable

42
Q

Charlotte, a CTA, determined that it was acceptable to introduce one of her clients to a tax planning arrangement being marketed by another firm, Pottax Ltd.

Charlotte also gave her professional opinion on a scheme being offered by another firm, Clatax Ltd.

As a result, Charlotte has been offered a commission payment by both Pottax Ltd and Clatax Ltd.

Which one of the following statements is correct?

A

Charlotte can only accept the commission from Pottax Ltd.

43
Q

Arav has told his client, Jo, that he is ceasing to act for her.

This is because Jo refuses to disclose an error in last year’s tax return. The error resulted in an underpayment of tax.

Identify whether each of the following statements are true or false.

A

True:
Arav must obtain Jo’s authority before passing details relating to Jo’s tax affairs to a prospective new adviser.

False:
Arav should write to HMRC to let them know why he is ceasing to act

44
Q

A client may receive a formal request for information from HMRC.

Identify whether each of the following statements are true or false.

A

True:
The member should consider whether specialist advice is needed regarding whether the request is valid.

False:
If the notice is legally effective, the client has no right of appeal

45
Q

Which of the following documents are privileged?

  1. Documents passing between a client and a non-lawyer if prepared for the purposes of giving legal advice
  2. Documents prepared by non-lawyer advisers if brought into existence for the purposes of litigation
A

2 only

46
Q

Which one of the following lays out the three key UK money laundering offences?

A

The Proceeds of Crime Act 2002

47
Q

A Money Laundering Reporting Officer (MLRO) may need to make a Suspicious Activity Report.

Choose the correct option to complete the following statement.

A MLRO should make external Suspicious Activity Reports to.

A

The National Crime Agency

48
Q

Which, if any, of the following is a valid defence against a charge of primary money laundering?

A

Is a valid defence:

The person has made a Suspicious Activity Report to their firm’s MLRO.

The person had no knowledge, nor suspicion, that they were dealing with the proceeds of crime.

49
Q

Firms are required to establish and maintain policies, controls and procedures to mitigate and manage effectively the risks of money laundering.

Which three of the following statements reflect CIOT and ATT guidance in this area?

A

The procedures should be easy to understand and follow for all staff

Firms should regularly review and update the policies

Records should be maintained in writing of the steps taken to communicate the policies and procedures within the business

50
Q

Anti-Money Laundering Guidance for the Accountancy Sector (AMLGAS) provides examples of key customer risk factors and breaks them down into high and low risk factors.

Identify for each of the following whether they are a high or low risk factor.

A

High risk factor:
The customer is a business that is cash intensive

Low risk factor:
The customer is a company whose securities are listed on a regulated market

The customer is a public administration, or a publicly owned enterprise

51
Q

AllTax, a CIOT supervised firm of tax advisers, is undertaking a review of the risk profile of one of its clients, Dak Ltd.

When undertaking its risk assessment of Dak Ltd, which two of the following statements should Allax take into account?

A

The most recent UK National Risk Assessment

The GIOT/ATT Supervisory Risk Assessment

52
Q

There is a required disclosure procedure in respect of money laundering offences, but there are also defences to, and exemptions from, failing to disclose offences.

Which three of the following are within the list of defences and exemptions?

A

The privileged circumstances exemption applies

The individual does not know, or suspect, money laundering has occurred and has not been provided with training by their employer in this area.

There is a reasonable excuse for not making the disclosure

53
Q

Stefan joined CloudTax, tax advisers, last year as a tax trainee

Stefan has not realised that a transaction undertaken by one of the client’s, whose tax compliance he has been working on, is money laundering

Stefan has not received any anti-money laundering training, so has taken no action to report the transaction
Who, if anyone, is likely to face prosecution?

A

CloudTax only

54
Q

To which of the following individuals do the Professional Rules and Practice Guidelines in principle apply?

  1. Alice, an ATT employed by a firm of Chartered Accountants
  2. Cathy, a CTA employed by a large supermarket chain
  3. Humphrey, a CTA employed by HMRC
A

1, 2 and 3

55
Q

Which of the following situations would be likely to give rise to a conflict of interest for you as a tax adviser?

  1. A long-standing client company which runs holiday parks is offering you a week at one of their resorts at a significantly reduced price
  2. A client company doing particularly well is offering you the chance to purchase some shares at a significantly reduced price
A

Both 1 & 2

56
Q

Belinda is trying to cut down on the amount of paperwork she stores in relation to her tax clients. She is considering scanning all the papers and then disposing of the originals in the local recycling bin.

Which TWO of the following statements are TRUE?

A

It is acceptable to keep electronic records as long as they are backed up

Belinda needs to ensure she acts within data protection laws

57
Q

The following statements refer to the giving of advice to a client by telephone.

Which of the following statements are TRUE and which are FALSE according to the guidance on the form and content of advice contained in Professional Rules and Practice
Guidelines (PRPG)?

  1. This is the default way to give advice
  2. PRPG encourages the giving of advice by telephone
  3. PRPG obliges members giving advice by telephone to confirm it in writing
  4. PRPG says members giving advice by telephone should consider whether to confirm it in writing
A

False; False; False; True

58
Q

Help Sheet E: Members’ Personal Tax Affairs states that A member who is in dispute with HMRC regarding their own tax affairs may wish to consider………….

A

Engaging an agent to represent them

59
Q

A tax return must contain at least the minimum information required by law. Cases will arise where there is doubt as to the correct treatment of an item of income or expenditure, or the computation of a gain or allowance. Additional disclosure should be considered in certain circumstances.

Which TWO of the following are NOT situations specifically detailed in PRPG that might require additional disclosure?

A

A return relies on a valuation

Where a claim is made for a relief

60
Q

Records relating to customer due diligence, the business relationship and occasional transactions……….?

A

must be kept for five years from the end of the client relationship

61
Q

The CCAB’s AMLGAS provides guidance on customer due diligence and the verification of a client’s identity, following the business’s initial risk assessment.

Which of the following would constitute the minimum documentation a tax adviser should see before beginning to act for a client who is employed, assuming the client is not classed as high risk?

  1. Valid photo ID, such as a passport
  2. HMRC-issued tax notification
  3. Proof of address, such as a council tax statement
A

1 only

62
Q

Andrew ceased to act for Mrs Bright last year, when she became a client of Mr Newbold. Andrew has now received a formal request from HMRC for information relating to Mrs Bright.

Which two courses of action are acceptable?

A

Andrew should provide the information requested

Andrew should refuse to provide any information protected by legal privilege

63
Q

Miss Cloud has asked Mr Rainham to act as her tax adviser. Mr Rainham requests various information from the previous adviser, Mr Storm, but is told that Miss Cloud will not authorise him to correspond with Mr Rainham regarding her tax affairs.
How should Mr Rainham next proceed?

A

He should ask Miss Cloud why she will not allow Mr Storm to correspond with him

64
Q

Sadge has taken on Marissa as a new client whom he considers will present a high’ risk.

Which of the following would Sadge be required to obtain to comply with the anti-money laundering guidance on client verification contained in AMLGAS?

  1. Original bank statement
  2. Valid passport
A

Both 1 & 2

65
Q

HMRC may have published its interpretation or indicated its practice on a point, but a client proposes to adopt a different view, whether or not supported by Counsel’s opinion.

Langham v Veltema is an important case because of its relevance to..…….

Complete the sentence.

A

finality and discovery

66
Q

Which TWO of the following fee arrangements are most likely to affect a member’s objectivity or present a conflict of interest?

A

Contingent fees

Retainer arrangements

67
Q

Tax advisers must keep clients” money separate from money belonging to their firm.

Which of the following statements are true regarding client accounts?

  1. A client account can be a current or deposit account
  2. A separate account is needed in respect of each individual client
A

True; False

68
Q

Mr Bundle is a Chartered Tax Adviser. He is not himself a member of any other professional body but works for a firm of ICAEW-qualified Chartered Accountants. A tax client who has already consulted another member of the firm, who is an authorised financial adviser, about setting up a pension, asks for Mr Bundle’s opinion.

What assistance, if any, may Mr Bundle offer?

A

Mr Bundle may comment on the advice given by the authorised financial adviser and advise on the benefits of setting up a pension

69
Q

Whinge & Grouch are a firm of ATT-qualified tax advisers, consisting of two partners and five junior tax managers. The partners are putting a complaints procedure in place and are looking at what information they should include in engagement letters

Which TWO pieces of information regarding complaints should they consider including in engagement letters from now on?

A

The name and status of the person to contact in the event of a complaint

The client’s right to complain to the TDB

70
Q

In which of the following circumstances must a member issue a fully detailed bill to a client?

  1. Whenever the client requests this
  2. Whenever fees are charged based on time and expenses
A

1 only

71
Q

Aziz acts as tax adviser to Mrs Glass. He receives a letter from HMRC to the effect that they are enquiring into Mrs Glass’s affairs, making it clear that they suspect she has committed a criminal offence. Aziz has never noticed anything suspicious about Mrs Glass.

What are the money laundering implications for Aziz here?

A

Aziz need only ever make a report to the NCA based on his own suspicions, not HMRC’s

72
Q

Ash, a CTA, is employed by a firm of tax advisers. Ash has realised that two of the senior partners are acting in serious breach of several guidelines contained in the PCRT.

Which of the following actions should Ash take?

  1. Attempt to persuade the senior partners to comply with the rules
  2. Seek guidance from the CIOT
  3. Consider taking legal advice
A

1, 2 and 3

73
Q

‘When dealing with errors in the tax affairs of a client, which TWO of the following represent a tax adviser’s primary objectives?

A

To give the the client appropriate advice

To seek to persuade the client to behave correctly

74
Q

Jason, a CTA, works for the manufacturing company Meteor Ltd. He owns 1% of the share capital of Meteor Ltd. Jason’s sister Janice is ATT qualified and runs her own part-time business preparing tax returns.

Do either Jason or Janice count as a ‘member in practice’ for the purposes of the Professional Rules and Practice Guidelines?

A

Only Janice is a member in practice

75
Q

A member must ensure that he has authority to disclose errors to HMRC. If in any doubt the member should confirm the position with the client.

What is recommended in Professional Conduct in Relation to Taxation as the best way to deal with the disclosure of HMRC errors?

A

Disclose errors after specifically confirming it with the client or include a general authority to disclose in the engagement letter

CBE ATT Ethics (3 decks)

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