Reference no: EM132604682

Michael Armstrong is an accountant with a small suburban practice. A significant proportion of his clients are medical practitioners, many of whom seems to be obsessed with avoiding taxes. One of his clients is Dr William Roberts, approaches Armstrong with a tax avoidance scheme that is being widely used. It involves selling accounts receivable at a discount to a financier. Roberts explains that the sale of assets at a loss does not incur tax and, as the revenue is never received from billings, there is no taxable income. When Armstrong expresses some doubts about the legality of the proposal, Roberts argues that it is 'perfectly legal' and 'widely used' and if Armstrong is not prepared to implement it, Roberts and all his partners will take their business somewhere else.

Required:

Question 1: In your opinion what should Armstrong do? Refer to the code of Ethics for Professional Accountants while justifying your answer.