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CA Final · Advanced Auditing, Assurance and Professional Ethics · Professional Ethics & Liabilities of Auditors

Orion Pharma Ltd, an audit client of CA Banerjee's firm, asks the firm to prepare its current and deferred tax calculations so that the company can post the accounting entries for tax assets and liabilities in its financial statements. Which statement best reflects the Code of Ethics' description of this service?

The service is a tax calculation service under the Code of Ethics. It covers preparing current and deferred tax liabilities or assets so that accounting entries in the audit client's financial statements can be made. It is not tax planning or tribunal representation, so the firm must evaluate threats before accepting it.

  1. AIt is a tax calculation service, meaning preparation of current and deferred tax liabilities or assets to support accounting entries in the client's financial statementsCorrect
  2. BIt is a tax planning service, because it concerns minimising the client's tax burden
  3. CIt is representation before tax tribunals, because it concerns tax liability
  4. DIt is not a tax service, because tax computation is an accounting matter only

Explanation

The Code describes tax calculation services as preparing calculations of current and deferred tax liabilities or assets for the purpose of preparing accounting entries supporting tax assets or liabilities in the audit client's financial statements. Option B is wrong because the task involves no planning advice, only computation for the accounting entries.

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