A long-standing client asks you to show some personal expenses as business expenses and to leave out cash receipts. How do you respond?
What the interviewer wants to hear
- Recognises this as tax evasion, not planning
- Refuses clearly and explains legal and professional consequences
- Offers legitimate alternatives
- Documents the advice
- Considers ending the engagement if the client insists
Model answer
I would be clear and calm: hiding cash receipts and claiming personal costs as business expenses is tax evasion, not planning, and I cannot be part of it. I would explain the consequences for the client: tax with interest, penalties for under-reporting or misreporting, and possible prosecution, as well as the risk from data the department already gets through AIS, GST returns and bank reporting. For me, as a professional, it would be misconduct and could cost my licence. Then I would offer legitimate alternatives: reviewing genuine business expenses he may have missed, choosing the right regime, timing purchases, using eligible deductions or presumptive schemes, and restructuring salary or business arrangements properly. I would put my advice in writing. If he still insists on filing incorrect figures, I would decline to prepare or sign that return and, if needed, end the engagement. Long-term trust with clients is built on honest advice.
Can you answer it under time pressure?
Take a timed hard round and get scored on every answer.
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