You are a registered accountant and auditor engaged in public practice. A prospective client recently contacted you and told you that he was contemplating converting his sole proprietorship into a private company. His businesss taxable income for the financial year ended 28 February 2019 was R210 000. He is, however, not certain as to the effect that such a change would have on his income tax liability, nor is he certain of the levels of assurance that you would be able to provide in any report that you would issue based on the different possibilities as to engagement circumstances.

Required:

3.1 Explain to the client the effect of the proposed change on his income tax liability.

3.2 Explain the possibilities as to the levels of assurance that you would be able to provide

in terms of the proposed changed business.