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Hi
If there is an ethical threat given that (Client states that fee for taxation services should be based on a percentage of tax saved)
For its explanation would it be better to write that
a)This constitutes self-interest threat as if taxes are understated the audit firm may not remain independent due to fear of losing high tax fees
OR would it be better to write that
b)This constitutes self-interest threat and it will be difficult for the audit firm to remain independent as they will want to save as much tax as possible in order to charge high tax feesoption a OR b, which one is more better to write
I think (b) is a fuller and better explanation, though (a) does usefully refer to understatement of tax.
However, the real problem is not saving the client tax, which is OK, it is the temptation to understate tax by not complying with tax legislation ie the accountant is encouraged to move from tax avoidance to tax evasion.
So basically for its explanation what shall I write? Or will the below explanation be fine
This constitutes self-interest threat and it will be difficult for the audit firm to remain independent as they will want to save as much tax as possible in order to charge high tax fees. Additionally audit firm could be tempted to suggest illegal tax avoidance schemes
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