1. Tax evasion occur when a taxpayer intentionally or accidentally under-declare assessable income or declare an expenses not allow for tax relief. Once accountant found that the client is evading tax, he should persuade the client to correct the taxation return misstatement.

In This case, Amanda is discovers an error that understated PP's tax liability by $19,000 and the total amount report in the previous year is $250,000. Since the amount is considering material, it is appropriate for Jay to inform ATO for the error but not directly because of confidentiality. Jay has to obtain the taxpayer's permission before notify the taxation authority and disclose the error. Once the client is not cooperate to give permission and fails to do voluntarily, Jay has to consider withdrawing and discontinuous the relationship with taxpayer.

To be an accountant, the primary duty is to ensure the client is not contributed to evasion of tax (APS 6, paragraph 11) providing the information is true and accurate. Once the error has been discover, as the professional responsibility, it is appropriate that correct the misstatement immediately without exception. Accountant should same respect for the tax law and make all reasonable inquiries as to the accuracy and completeness of the financial information provided by the client without verification. In this case, since Jay is already aware that the client is evading tax, he should try to persuade the client correct the return misstatement. With the subsequent responsibility, Jay has to refuse the association with tax return until the misstatement is rectified. If the misstatement is material, the accountant should carefully review and withdrawing the service and inform the taxing authority that they are no longer act for the client.

2. Jay had breached the professional responsibilities while Amanda had not breached the professional