Read the bottom of a Form 1040 (the paper one, not the electronic version):
"Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge."
If you have any knowledge that the return is not true, correct, and complete, then you can personally be prosecuted for perjury (this never actually happens, but the risk is still there).
Do not, under any circumstances, file a return that you believe false. A questionable interpretation that needs to be resolve by the tax courts is one thing; outright tax fraud is another. If you lose the client, fine. It is better than losing your entire business and possibly your freedom.
