If a member knows a client has acted outside tax laws, they:

The correct response is that a CPA might choose to withdraw from the engagement. When a member becomes aware that a client is acting outside of tax laws, they face a significant ethical and professional dilemma. In such a situation, the CPA has a responsibility to maintain their integrity and adherence to ethical standards.

Withdrawal is a viable option because it protects the CPA from being complicit in potentially illegal actions. If a CPA continues to represent a client who is involved in tax law violations, they may risk their professional reputation and possibly face disciplinary actions from licensing boards.

The CPA's decision to withdraw allows them to distance themselves from the unethical activity without breaching client confidentiality, as mandated by ethical guidelines. This choice underscores the importance of maintaining professional integrity and compliance with laws and standards in the field of accounting.

While informing the authorities is a consideration, it often depends on the specific circumstances and whether there's a requirement to disclose such information. Ignoring the issue or reporting it incorrectly on a tax return does not align with the ethical obligations of a CPA, as they are required to act in a manner that upholds the law and the principles of their profession.