Section H.07.022
Which of the following statements best differentiates a principle and a rule as per AICPA's Code of Professional Conduct? A principle is regulatory force with advanced education and training and a rule is a value-based internal force for behavioral action. A principle is an external person who oversees the behavioral actions of those who practice a profession, while a rule is a value-based internal force for behavioral action. A principle is a value-based internal force for behavioral action and a rule is an authoritative regulatory force for behavioral action. A principle is an external person who oversees the behavioral actions of those who practice a profession, while a rule is an authoritative regulatory force for behavioral action.
A principle is a value-based internal force for behavioral action and a rule is an authoritative regulatory force for behavioral action. A principle is a value-based internal force for behavioral action and a rule is an authoritative regulatory force for behavioral action.
Which of the following statements best differentiates a profession and a professional? A profession is an occupation that requires advanced education and training and a professional is a person who practices a profession. A profession is an occupation that requires advanced education and training and a professional is a person who oversees the behavioral actions of those who practice a profession. A profession is an occupation that requires advanced education and training and a professional is a value-based internal force for behavioral action. A profession is a value-based internal force for behavioral action and a professional is a person who oversees the behavioral actions of those who practice a profession.
A profession is an occupation that requires advanced education and training and a professional is a person who practices a profession. A profession is an occupation that requires advanced education and training and a professional is a person who practices a profession.
There are five principal characteristics that distinguish professional fields from other vocations. Which of the following is not one of them? Standards of conduct governing professionals' relationships with clients, colleagues, and the public. A requirement for all members to have earned advanced degrees. Recognition and acceptance by society. A specialized body of knowledge.
A requirement for all members to have earned advanced degrees. The five principal characteristics that help differentiate professional fields from other vocations are: A body of specialized knowledge acquired through formal education Admission to the profession governed by standards of professional qualifications Recognition and acceptance by society of professional status, and concurrent recognition and acceptance of social responsibility by the professional Standards of conduct governing relationships of the professional with clients, colleagues, and the public An organization devoted to the advancement of the obligations of the professional group
Professional organizations, such as the Association of Certified Fraud Examiners, have codes of ethics because: They provide more direct solutions to professional ethical dilemmas than might exist under general ethical principles. They facilitate practical enforcement and profession-wide internal discipline. They serve as a reference and benchmark for ethical guidance. All of these answers are correct.
All of these answers are correct A code of conduct serves a useful purpose as a reference and benchmark for ethical guidance. A code makes explicit some of the criteria for conduct particular to a profession. In this way, codes of professional ethics are able to provide some direct solutions that might not be available from general ethics theories. Furthermore, an individual is better able to know what the profession expects when a code of ethical conduct is in place. From the viewpoint of an organized profession, a code is a public declaration of principled conduct and a means of facilitating enforcement of standards of conduct. Practical enforcement and profession-wide internal discipline would be much more difficult if members were not first put on notice of the standards.
The ACFE Code of Professional Ethics prohibits fraud examiners from engaging in conflicts of interest. Which of the following situations should a fraud examiner avoid to ensure compliance with this rule? Undertaking engagements that create a hardship or loss to the fraud examiner's full-time employer. Undertaking an engagement to secretly infiltrate the fraud examiner's employing organization and transmit inside information to another party. Undertaking engagements for both sides to a particular controversy or issue. All of these answers are correct.
All of these answers are correct The ACFE Code of Professional Ethics states that ACFE members shall not engage in conflicts of interest. A conflict of interest exists when a fraud examiner's ability to objectively evaluate and present an issue for a client is impaired by a current, prior, or potential future relationship with parties to the fraud examination. Deciding if a conflict or a community of interests exists depends on the facts of each particular situation; however, the following are some general rules concerning conflicts of interest: A fraud examiner employed full time by a company should not engage in other jobs that create a hardship or loss to the employer. A fraud examiner should not be a "double agent" employed by one company, but retained by another company or person to infiltrate the employer and transmit inside information (unless, of course, the employing company agrees to the arrangement in order to apprehend other parties employed by the company). A fraud examiner should not accept engagements from both sides to a controversy—just like lawyers are prohibited from representing both parties in a transaction, lawsuit, or trial.
In the context of a fraud examination, a mindset of professional skepticism means: Fraud examiners should relax their attitude of skepticism only when the evidence shows no signs of fraud. All of these answers are correct. The fraud examiner's professional skepticism can be dispelled only by evidence. Fraud examiners should always begin their assignments with the belief that something is amiss.
All of these answers are correct. As part of exercising professional integrity and competence, fraud examiners must always perform their work with a mindset of professional skepticism and begin assignments with the belief that something is wrong or someone is committing a fraud (depending on the nature of the assignment and the preliminary information available). Furthermore, fraud examiners should relax their attitude of skepticism only when the evidence shows no signs of fraudulent activity. At no time is a fraud examiner entitled to assume a fraud problem does not exist. Thus, professional skepticism can be dispelled only by evidence. As a result, opinions or attestations about a fraud-free environment are absolutely prohibited for ACFE members.
In the context of fraud examination, integrity requires: All of these answers are correct. An ability to analyze situations where no professional rules are specifically applicable and determine right from wrong. Independence of mental attitude and avoidance of conflicts of interest. Subordination of desires for personal gain to the interests of clients, employers, and the public.
All of these answers are correct. Integrity requires honesty, truthfulness, trustworthiness, and confidentiality. It also requires subordination of desires for personal gain to the interests of clients, employers, and the public. It requires independence of mental attitude and avoidance of conflicts of interest. Additionally, integrity means that a fraud examiner should have a well-developed sense of moral philosophy—an ability to analyze situations where no rules of the ACFE Code of Professional Ethics are specifically applicable and to be able to distinguish right from wrong. It does not mean, however, that an ACFE member must be perfect in all technical matters, nor does it mean that fraud examiners and others cannot have honest differences of opinion. In the course of a fraud examination, inadvertent errors, mistakes of judgment, and other problems might cause conflict. In such cases, a fraud examiner can preserve integrity either by admitting error or by convincingly justifying a difference of perception or opinion.
Which of the following statements is true regarding the disclosure of confidential client information? A fraud examiner is only allowed to respond to a legal court order when his client grants him authorization to do so. A fraud examiner can reveal confidential client information when responding to a legal court order. Fraud examiners are always bound by confidentiality, even when refusing to disclose information violates the law. Confidential information provided to a fraud examiner by a client is considered privileged and therefore legally exempt from disclosure in all circumstances.
Correct! A fraud examiner can reveal confidential client information when responding to a legal court order. Two articles of the ACFE Code of Professional Ethics apply in situations regarding release of confidential client information. Article IV states: "An ACFE member will comply with lawful orders of the courts, and will testify to matters truthfully and without bias or prejudice." Article VI says: "An ACFE member shall not reveal any confidential information obtained during an engagement without proper authorization." However, fraud examiners are not bound by confidentiality when doing so would violate the law. Thus, fraud examiners can reveal client confidences when responding to a legal court order.
The ACFE Code of Professional Ethics explicitly prohibits which of the following? Unethical conduct. All of these answers are correct. Conflicts of interest. Illegal conduct.
Correct! All of these answers are correct. Article II of the ACFE Code of Professional Ethics states: "An ACFE member shall not engage in any illegal or unethical conduct, or any activity which would constitute a conflict of interest." This rule is a composite of three explicit prohibitions: illegal conduct, unethical conduct, and conflict of interest.
As part of their responsibilities under the ACFE Code of Professional Ethics, in collecting evidence, fraud examiners must: All of these answers are correct. Obtain and document evidence such that the chain of custody is preserved. Preserve the integrity of relevant evidence. Ensure that all necessary evidence is obtained.
Correct! All of these answers are correct. As part of the ACFE Code of Professional Ethics, ACFE members are required to collect and evaluate a sufficient amount of relevant evidence to afford a reasonable and logical basis for decisions. Thus, fraud examiners must collect evidence, whether exculpatory or incriminating, that supports fraud examination results and will be admissible in subsequent proceedings. To do so, the fraud examiner must obtain and document the evidence in a manner that ensures that all necessary evidence is obtained and that the chain of custody is preserved. Additionally, fraud examiners must act prudently to preserve the integrity of relevant evidence and material.
The ACFE Code of Professional Ethics contains sections covering which of the following? Professional improvement. Confidential information. All of these answers are correct. Basis for opinions.
Correct! All of these answers are correct. The ACFE Code of Professional Ethics is divided into eight sections covering the following topics: I. Commitment to professionalism II. Illegal or unethical conduct III. Professional competence of assignments IV. Lawful orders of the courts V. Basis for opinions VI. Confidential information VII. Reveal material matters VIII. Increase professional competence
During a fraud examination, John, a CFE, becomes aware of a situation that might appear to others as though he has a conflict of interest, even though there is no actual conflict. To address the situation, John's best course of action is to: None of these answers are correct. Immediately disclose the situation to company management. Immediately withdraw from the engagement without disclosing the potential conflict to management. Continue working on the assignment without disclosing the potential conflict but take care to avoid any areas where an actual conflict might arise.
Correct! Immediately disclose the situation to company management. ACFE members are responsible for maintaining independence in attitude and appearance and for approaching and conducting fraud examinations in an objective and unbiased manner. Independence of attitude requires impartiality and fairness in conducting fraud examinations and in reaching resulting conclusions and judgments. Fraud examiners must also be sensitive to the appearance of independence so that conclusions and judgments will be accepted as impartial by knowledgeable third parties. Fraud examiners who become aware of a situation or relationship that could be perceived to impair independence, whether or not actual impairments exist, should inform management immediately and take steps to eliminate the perceived impairment, including withdrawing from the examination if necessary. Objectivity refers to the ability to conduct fraud examinations without being influenced by one's own personal feelings or the feelings and motives of others. To ensure objectivity in performing examinations, fraud examiners must maintain an independent mental attitude, reach judgments on examination matters without undue influence from others, and avoid being placed in positions where they would be unable to work in an objective professional manner. All possible conflicts of interest should be disclosed.
Under the ACFE Code of Professional Ethics, evidence and conclusions are considered ___________ if knowledge of them would affect clients' decisions based on a fraud examiner's report. Reliable. Confidential. Material. Circumstantial.
Correct! Material. Evidence and conclusions are material if knowledge of them would affect clients' decisions based on a fraud examiner's report. Materiality is a user-oriented concept. If matters omitted from a report were known to the users, and their own perceptions and conclusions would be different due to this knowledge, the omitted information is material. Article VII requires fraud examiners to reveal all material matters discovered during the course of an examination which, if omitted, could cause a distortion of the facts.
Leo, a Certified Fraud Examiner, conducted a fraud examination at Blue Corp. Anna was a prime suspect in the disappearance of money, but Leo could not prove it. Later, Leo discovered Anna had been recently hired by Red Corp., another client of his. Under the ACFE Code of Professional Ethics, Leo must: None of these answers are correct. Inform Red Corp. Inform Red Corp. if the evidence is clear and convincing. Not inform Red Corp.
Correct! Not inform Red Corp Article VI says that: "An ACFE member shall not reveal any confidential information obtained during a professional engagement without proper authorization." Under this scenario, Leo may not disclose information about Anna's employment at Blue Corp. or that she was a suspect in the disappearance of money without the authorization of Blue Corp. However, even if that authorization was received, Leo is limited as to what he can disclose. Anna was a suspect; she did not confess, nor was she convicted of a crime. If Leo does disclose this information, he could run the risk of serious legal problems.
________ occurs when a testifying expert is specifically hired to represent the engaging attorney's theory. Unconscious bias Conscious bias Selection bias Witting bias
Correct! Selection bias Selection bias occurs when a testifying expert is specifically hired to represent the engaging attorney's theory.
Bryan, a CFE, locks the door to the interview room and refuses to allow the suspect to leave despite repeated requests. Later, the suspect sues (successfully), claiming that he was falsely imprisoned. Which of the following statements is true? This conduct would not be a violation of the ACFE Code of Professional Ethics under any circumstances. This conduct would be a violation of the ACFE Code of Professional Ethics only if Bryan knew the conduct was illegal. This conduct would be a violation of the ACFE Code of Professional Ethics. This conduct would be a violation of the ACFE Code of Professional Ethics only if the suspect was innocent of fraud.
Correct! This conduct would be a violation of the ACFE Code of Professional Ethics. Some rules for professionals insert the word knowingly in relation to illegal activities, saying: "One should not knowingly be a party to an illegal activity." The ACFE Code of Professional Ethics does not include this way out. Fraud examiners are generally not entitled to claim ignorance of the law. They are expected to know a considerable amount of law in connection with investigations, and they are expected to know when to consult a lawyer. In the situation in question, even if Bryan didn't know that locking the door would constitute false imprisonment, he has still violated the ACFE Code of Professional Ethics.
To be considered a profession, a field such as fraud examination must have a body of knowledge unique to itself. True. False.
False A fraud examiner's work involves specialized knowledge derived from several other fields (e.g., accounting, auditing, criminology, investigation, and law). A profession might not have a body of knowledge truly unique unto itself, but it should have one that requires study, comprehension, and practice beyond the everyday abilities other people might possess.
A professional association enjoys a high level of public trust and confidence even though it can never be legalized. False. True.
False A professional association can be legalized by a regulatory body, such as a state board of accountancy.
ACFE, the world's largest antifraud organization, requires its members to comply with six fundamental rules as per ACFE's Code of Professional Standards. True. False
False ACFE, the world's largest antifraud organization, requires its members to comply with six fundamental principles, not rules, as per ACFE's Code of Professional Standards.
As professional standards serve to improve the consistency and quality of practice, various organizational standards would always be consistent with each other. True. False.
False Although professional standards generally serve to improve the consistency and quality of practice, there are some areas of inconsistency in various organizational standards (such as AICPA vs. NACVA) that must be reconciled.
Under the ACFE Code of Professional Ethics, a fraud examiner is strictly prohibited from accepting an assignment to uncover fraud in a company in which he has a major interest. False True.
False Article II of the ACFE Code of Professional Ethics states: "An ACFE member shall not engage in any illegal or unethical conduct, or any activity which would constitute a conflict of interest." However, a fraud examiner does not have the same responsibilities as a Chartered Accountant or Certified Public Accountant. For example, a CA or CPA generally would not be able to express an audit opinion on a company in which he held a major financial interest. In the case of the fraud examiner, he would be able to accept such an assignment under most conditions, since the goal of the fraud examiner is to gather facts regarding a potential fraud, not to express an opinion. The fraud examiner should, however, make appropriate disclosures regarding his ownership.
During an admission-seeking interview of a fraud suspect, Gary, a Certified Fraud Examiner, accuses the suspect of having committed a fraud. Gary's accusation violates the ACFE Code of Professional Ethics. True. False.
False Article V of the ACFE Code of Professional Ethics states: "An ACFE member, in conducting an examination, will obtain evidence or other documentation to establish a reasonable basis for any opinion rendered. No opinion shall be expressed regarding the guilt or innocence of any person or party." Although it does not specifically state such, Article V really applies to statements of opinion made to third parties. If the fraud examiner was interviewing a suspect whose guilt was highly probable, the Code would not prohibit the fraud examiner from making accusations. The admission-seeking process, used extensively by fraud examiners, requires that accusations be made of the probable guilty party. As long as these accusations are not communicated to third parties, the fraud examiner would not be in violation of the Code.
Under the ACFE Code of Professional Ethics, fraud examiners are strictly prohibited from expressing opinions on technical matters. True. False.
False Article V of the ACFE Code of Professional Ethics states: "An ACFE member, in conducting examinations, will obtain evidence or other documentation to establish a reasonable basis for any opinion rendered. No opinion shall be expressed regarding the guilt or innocence of any person or party." Opinions, under Article V, may be given if there is a reasonable basis for them. The only opinions strictly not allowed are those regarding the guilt or innocence of any person or party. Additionally, opinions regarding technical matters generally are permitted if the fraud examiner is qualified as an expert in the matter. For example, a permissible opinion might address the relative adequacy of an entity's internal controls. Likewise, a permissible opinion might regard whether financial transactions conform to generally accepted accounting principles.
Rachel, an independent CFE, was hired by Laura, the CEO of Black and White Inc., to investigate a case of alleged vendor overbilling. During the investigation, Rachel learns that Laura is involved in an unrelated fraud scheme. Under the ACFE Code of Professional Ethics, Rachel should resign from the engagement without disclosing the evidence against Laura. False. True.
False Difficult problems arise over fraud examiners' obligations to blow the whistle about clients' or employers' shady or illegal practices; thus, fraud examiners must act with prudent caution in such circumstances. In this particular case, the company's board of directors should probably be advised and permitted to determine the next steps to take. In general, fraud examiners are not obligated to blow the whistle on clients or employers. However, circumstances might exist in which the fraud examiner is morally and legally justified in making disclosures to appropriate outside parties. Examples of such circumstances include when a client or employer has intentionally involved a fraud examiner in its illegal conduct or when a client or employer has distributed misleading reports based on the fraud examiner's work. If Rachel were to resign without disclosing the evidence, such action would be tantamount to allowing Laura's scheme to continue without anyone being aware of the fraud. Fraud examiners would not be able to justify doing nothing.
Lee, a Certified Fraud Examiner, was hired to investigate a company. After he carefully examined the company, he issued a report that stated, in part, "... in my opinion, this operation is free of material fraud." Such an opinion is permitted under the ACFE Code of Professional Ethics. False. True.
False Fraud examiners must always perform their work with an attitude of skepticism and begin with the belief that something is wrong or someone is committing a fraud (depending on the nature of the assignment and the preliminary information available). Furthermore, fraud examiners should relax their attitude of skepticism only when the evidence shows no signs of fraudulent activity. At no time is a fraud examiner entitled to assume a fraud problem does not exist. Thus, professional skepticism can be dispelled only by evidence. As a result, opinions or attestations about a fraud-free environment are absolutely prohibited for ACFE members.
During the course of a fraud examination, Omar, an employee of XYZ Inc., approaches Maryam, a Certified Fraud Examiner and fellow employee of XYZ, and tells Maryam that he knows of a major fraud being committed by company management. However, Omar says he can only provide details if Maryam promises him absolute confidentiality. In response to Omar's condition, Maryam should agree to keep the source of the information confidential, even though she knows she will eventually have to reveal Omar's identity. False. True.
False Fraud examiners must remember that the confidentiality relationship runs first to the client or employer, and the promise of confidentiality is understood to exist without being spoken. In the case of Omar (the employee/informant), Maryam (the Certified Fraud Examiner) does not have an understood or unspoken promise of confidentiality. Maryam should tell Omar that she will try to keep the information as confidential as possible, but it would be unethical for Maryam to promise confidentiality to the employee; her first obligation is to the employer.
In the context of a fraud examination, the preservation of integrity requires that the fraud examiner avoid all differences of opinion regarding all material matters with the other parties to the engagement. True. False.
False Integrity requires honesty, truthfulness, trustworthiness, and confidentiality. It also requires subordination of desires for personal gain to the interests of clients, employers, and the public. It requires independence of mental attitude and avoidance of conflicts of interest. Additionally, integrity means that a fraud examiner should have a well-developed sense of moral philosophy—an ability to analyze situations where no rules of the ACFE Code of Professional Ethics are specifically applicable and to be able to distinguish right from wrong. It does not mean, however, that an ACFE member must be perfect in all technical matters, nor does it mean that fraud examiners and others cannot have honest differences of opinion. In the course of a fraud examination, inadvertent errors, mistakes of judgment, and other problems might cause conflict. In such cases, a fraud examiner can preserve integrity either by admitting error or by convincingly justifying a difference of perception or opinion.
The duty of loyalty means that people in a fiduciary relationship must act with such care as an ordinarily prudent person would employ in similar positions. True. False.
False People in a position of trust or fiduciary relationship—such as officers, directors, high-level employees of a corporation or business, and agents and brokers—owe certain duties to their principals or employers, and any action that runs afoul of such fiduciary duties constitutes a breach. The principal fiduciary duties are loyalty and care. The duty of loyalty requires that the employee/agent act solely in the best interest of the employer/principal, free of any self-dealing, conflicts of interest, or other abuse of the principal for personal advantage. The duty of care means that people in a fiduciary relationship must act with such care as an ordinarily prudent person would employ in similar positions.
Under the ACFE Code of Professional Ethics, information provided to a fraud examiner by a client is considered privileged information and is therefore protected from being legally demanded by outside parties. True. False.
False Privileged information is information that cannot be demanded, even by a court. Legal professional privilege precludes disclosure of confidential communications between professional legal advisors (e.g., solicitors, barristers, attorneys) and their clients. Some jurisdictions provide similar professional privileges for physicians and priests. However, fraud examiners do not have any such privilege in common law or by statute, and the ACFE Code of Professional Ethics does not assume a privileged status for the fraud examiner-client/employer relationship.
If a fraud examiner makes a mistake in judgment, he should avoid admitting to the error, as it could compromise the integrity of his case. False. True.
False The ACFE Code of Professional Ethics requires ACFE members to exhibit the highest level of integrity at all times. This does not mean, however, that an ACFE member must be perfect in all technical matters, nor does it mean that fraud examiners and others cannot have honest differences of opinion. In the course of a fraud examination, inadvertent errors, mistakes of judgment, and other problems might cause conflict. In such cases, a fraud examiner can preserve integrity either by admitting error or by convincingly justifying a difference of perception or opinion.
The function of ethical principles is to provide individuals with a straightforward means to determine the answer to any problem they face. False. True.
False The function of ethical principles and rules is not to provide a simple and sure answer to all problems, but to provide some guidelines for individual decisions and actions. In considering general ethics, a fraud examiner's primary goal is to arrive at a set of acceptable methods for making ethical decisions to fulfill all his roles. Consequently, an understanding of some of the general principles of ethics can serve as background in understanding the ethical decisions faced by fraud examiners, as well as the ethical guidelines provided in the ACFE Code of Professional Ethics.
Under the ACFE Code of Professional Ethics, fraud examiners are strictly prohibited from revealing confidential client information under any circumstances. False. True.
False Two articles of the ACFE Code of Professional Ethics apply in situations regarding release of confidential client information. Article IV states: "An ACFE member will comply with lawful orders of the courts, and will testify to matters truthfully and without bias or prejudice." Article VI says: "An ACFE member shall not reveal any confidential information obtained during an engagement without proper authorization." However, fraud examiners are not bound by confidentiality when doing so would violate the law. Thus, fraud examiners can reveal client confidences when responding to a legal court order.
To be in compliance with the ACFE Code of Professional Ethics, fraud examiners must have an expert level of skill and knowledge for every circumstance that might be encountered in a fraud examination. False. True.
False. Fraud examiners cannot be expected to have an expert level of skill and knowledge for every circumstance that might be encountered in a fraud examination. Nevertheless, they must have sufficient skill and knowledge to recognize when additional training or expert guidance is required. It is the responsibility of a fraud examiner to ensure that necessary skills, knowledge, ability, and experience are acquired or available before going forward with a fraud examination.
Which of the following statements is true of unconscious adversarial bias for testifying expert witnesses? Identifying and eliminating, or at least neutralizing, unconscious bias is no big task. The first opportunity to identify and eliminate unconscious bias falls to opposing counsel. It is extremely prevalent among law enforcement and government witnesses. It occurs when an expert is specifically hired to represent the engaging attorney's theory.
It is extremely prevalent among law enforcement and government witnesses. Unconscious bias is extremely prevalent among law enforcement and government witnesses.
Which of the following statements is true of characteristics of a profession? There are published authoritative performance and ethical standards for a profession even though it is never legalized by a regulatory body. It is organized into associations and there are specific requirements for admission into such associations and maintenance of membership. It enjoys a high level of public trust and confidence even though it is never legalized by a regulatory body. Violations of a profession's performance and ethical standards would always result in expulsion from membership.
It is organized into associations and there are specific requirements for admission into such associations and maintenance of membership. A profession is organized into associations and there are specific requirements for admission into such associations and maintenance of membership.
Which of the following statements is true of the principle of due professional care in the ACFE Standards of Professional Conduct? It requires members to adequately plan and supervise professional services. It urges members to qualify the understanding with the client for any significant changes. It urges a member to express an opinion or state affirmatively that the financial statements of an entity are presented in conformity with GAAP. It requires a member to commit discreditable acts and to always conduct themselves in the best interests of the profession.
It requires members to adequately plan and supervise professional services. The principle of due professional care requires members to adequately plan and supervise professional services.
The reason the ACFE Code of Professional Ethics restricts the types of opinions fraud examiners may express is to protect the fraud examiner from claims of: Compounding a felony. Libel. False imprisonment. None of the above.
Libel Libel and slander can cause personal injury and subject a fraud examiner to a lawsuit for damages. Libel is a written defamation of someone else's character. Slander is a spoken defamation. The content of a libelous or slanderous message must: Contain words that injure another person's character or reputation or hold him up to ridicule. Be communicated orally or in writing to other people. Cause an actual damage to the person who is the subject of the communication. The risks involved in libel and slander are reasons for having the rule in the ACFE Code of Professional Ethics that prohibits expression of opinions on the guilt or innocence of people.
Roger has just completed a fraud examination report containing confidential information for ABC Inc., a client. He received a call from the local police requesting a copy of the report. Which of the following statements is false? Roger can turn over the report without any repercussions because he owns the information contained in the document. Roger can turn over the report if his client consents. Roger can turn over the report if it is demanded by a court order. Roger can turn over the report if the information is requested in a search warrant.
Roger can turn over the report without any repercussions because he owns the information contained in the document. Confidential information, for all practical purposes, is any and all information a fraud examiner might obtain in the course of work, whether it be from the company or client for whom an investigation is performed or from any other source consulted during the work. However, there is no legal privilege that exists between a fraud examiner and his client. That means that although the fraud examiner is not allowed to reveal confidential information without authorization from the client, if the information is subject to a legal court order or search warrant, the fraud examiner must turn it over.
Which of the following is an example of a violation of the ACFE Code of Professional Ethics' requirement for diligent, professional behavior? Delegating a task to a lower-level employee and overseeing that individual's performance. All of these answers are correct. Skipping vital investigation steps to improve the efficiency of a fraud examination. Obtaining more evidence than the minimum amount needed to prove a case.
Skipping vital investigation steps to improve the efficiency of a fraud examination. Skipping vital investigation steps to improve the efficiency of a fraud examination would not only create the possibility of missing key pieces of evidence, but it would also be a violation of Article I of the ACFE Code of Professional Ethics. This article states that: "An ACFE member shall at all times demonstrate a commitment to professionalism and diligence in the performance of his or her duties." The "diligence in the performance of his or her duties" phrase in this rule refers to several activities that collectively define high-quality fraud examination work, including properly planning assignments and supervising assistants and colleagues, avoiding conflicts of interest, performing tasks with competence, obtaining sufficient evidence to establish a basis for opinions, maintaining confidential relations, and avoiding distortion of facts.
Which of the following is a fraud examiner permitted to express an opinion regarding? The guilt of a particular individual. None of these answers are correct. The innocence of a particular individual. The effectiveness of an organization's internal controls.
The effectiveness of an organization's internal controls Article V of the ACFE Code of Professional Ethics states: "An ACFE member, in conducting examinations, will obtain evidence or other documentation to establish a reasonable basis for any opinion rendered. No opinion shall be expressed regarding the guilt or innocence of any person or party." The only opinions strictly not allowed are those regarding the guilt or innocence of any person or party. However, opinions regarding technical matters generally are permitted if the fraud examiner is qualified as an expert in the matter. For example, a permissible opinion might address the relative adequacy of an entity's internal controls. Likewise, a permissible opinion might regard whether financial transactions conform to generally accepted accounting principles.
In general, the lowest level of reference for making moral decisions is: None of these answers are correct. Individual standards. Philosophical principles. The law.
The law When faced with an ethics-related problem, it is appropriate to begin analyzing the issue by asking: Is it legal? The law, including professional rules and regulations, deals with actions that are permitted and prohibited, but it is the lowest level of reference for moral decisions; a law might permit an action that is prohibited by a profession's code of ethics. Laws, rules, and regulations function as standards by which to judge whether an action is acceptable or illegal, but not whether the behavior is right. For instance, if you have promised an individual that you will honor a contract, you are ethically bound to do so, regardless of your legal responsibility; under these facts, upholding your promise is the right thing to do, no matter what the law says.
Advocacy is the threat that a member will promote a client or employer's position to the point that his or her objectivity is compromised. False. True.
True Advocacy is the threat that a member will promote a client or employer's position to the point that his or her objectivity is compromised.
In reporting the results of a fraud examination, a fraud examiner is required to disclose any information which, if not disclosed, would change a user's perceptions and conclusions. True. False.
True Article VII of the ACFE Code of Professional Ethics states: "An ACFE member shall reveal all matters discovered during the course of an examination, which, if omitted, could cause a distortion of the facts." This rule demands full and fair reporting of the findings made in investigations. Two words—material and distortion—are key to this requirement. Information is material if having knowledge of such information might reasonably be expected to influence a client's or employer's decisions based on a fraud examiner's report. Accordingly, materiality is a user-oriented concept. Thus, an item of information that, if omitted from a report, would change a user's perceptions and conclusions is material. When determining what information is material, fraud examiners should not consider what they themselves think is important and material; instead, they should try to decide what users will consider important and material. Thus, fraud examiners must project a decision-making process onto the users. This rule also provides that fraud examiners shall disclose all material matters discovered during the course of a fraud examination that, if omitted, could distort the facts. The "distortion of facts" portion of the rule refers to omissions. Distortion is related to materiality and users' decisions. The distortion of facts in a report could cause users to undertake inappropriate actions.
Fraud examiners should consider the nature of the assignment and the preliminary information available in forming the engagement hypothesis. False. True.
True As part of exercising professional integrity and competence, fraud examiners must always perform their work with a mindset of professional skepticism and begin assignments with the belief that something is wrong or someone is committing a fraud (depending on the nature of the assignment and the preliminary information available). Furthermore, fraud examiners should relax their attitude of skepticism only when the evidence shows no signs of fraudulent activity. At no time is a fraud examiner entitled to assume a fraud problem does not exist. Thus, professional skepticism can be dispelled only by evidence. As a result, opinions or attestations about a fraud-free environment are absolutely prohibited for ACFE members.
Justine, a CFE, was contacted regarding an engagement to investigate a complex insurance fraud case involving an organized crime ring. Justine had previously taken a self-study CPE course on insurance fraud schemes, but she had no other training or experience in such cases. However, she accepted the engagement and chose to conduct the work herself. Justine's conduct would likely be a violation of the ACFE Code of Professional Ethics. False. True.
True Based on the facts provided, Justine likely violated Article III of the ACFE Code of Professional Ethics, which states: "An ACFE member shall, at all times, exhibit the highest level of integrity in the performance of all professional assignments, and will accept only assignments for which there is a reasonable expectation that the assignment will be completed with professional competence." Professional competence refers to how well fraud examiners do their job. Determination of competence always depends on the specific facts and circumstances of the assignment. In this situation, if Justine only had received basic training and had no other experience in insurance fraud investigations, she would not be considered qualified or professionally competent to conduct such an examination for a client. Such conduct would be a violation of Article III, which requires fraud examiners to accept only those assignments which can be completed with professional competence.
In considering general ethics, a person's primary goal is to arrive at a set of acceptable methods for making ethical decisions to fulfill all his roles. False. True.
True Every person acts not only as an individual but also as a member of a profession and as a member of society. Hence, fraud examiners might also be spectators (observing the decisions of colleagues), advisors (counseling with coworkers), instructors (teaching students or new employees on the job), judges (serving on disciplinary committees), and critics (commenting on the ethical decisions of others). All of these roles are important in the practice of professional ethics. In considering general ethics, the fraud examiner's primary goal is to arrive at a set of acceptable methods for making ethical decisions to fulfill all his roles.
Materiality in a fraud examiner's report is determined by the perceptions and conclusions of the report's user. False. True.
True Evidence and conclusions are material if knowledge of them would affect a client's decisions based on a fraud examiner's report. Materiality is a user-oriented concept. If matters omitted from the report were known to the users, and their own perceptions and conclusions would be different due to this knowledge, the omitted information is material. Fraud examiners are placed in the difficult position of determining not what they consider important and material, but what they think the users will consider important and material.
Failing to properly supervise all assistants and others who are delegated work on a fraud examination engagement is a violation of the ACFE Code of Professional Ethics. True. False.
True Failing to properly supervise all assistants and others who are delegated work on a fraud examination engagement would be in violation of Article I of the ACFE Code of Professional Ethics. This article states that: "An ACFE member shall at all times demonstrate a commitment to professionalism and diligence in the performance of his or her duties." The "diligence in the performance of his or her duties" phrase in this rule refers to several activities that collectively define high-quality fraud examination work, including properly planning assignments and supervising assistants and colleagues, avoiding conflicts of interest, performing tasks with competence, obtaining sufficient evidence to establish a basis for opinions, maintaining confidential relations, and avoiding distortion of facts.
Fraud examiners generally are not entitled to claim ignorance of the law as a defense for illegal activity. True. False.
True Some rules for professionals insert the word knowingly in relation to illegal activities, saying: "One should not knowingly be a party to an illegal activity." The ACFE Code of Professional Ethics does not include this way out. Fraud examiners are generally not entitled to claim ignorance of the law. They are expected to know a considerable amount of law in connection with investigations, and they are expected to know when to consult a lawyer.
Under the ACFE Code of Professional Ethics, fraud examiners are absolutely prohibited from expressing opinions regarding the guilt or innocence of any party. True. False.
True The guilt or innocence of any person or party is the sole judgment of the judge or jury, not of the fraud examiner. Consequently, fraud examiners are absolutely prohibited from expressing opinions regarding guilt or innocence. Article V of the ACFE Code of Professional Ethics states: "An ACFE member, in conducting examinations, will obtain evidence or other documentation to establish a reasonable basis for any opinion rendered. No opinion shall be expressed regarding the guilt or innocence of any person or party."
If a Certified Fraud Examiner fails to meet the specified annual minimum continuing professional education requirements, he will be in violation of the ACFE Code of Professional Ethics. False. True.
True. Article VIII of the ACFE Code of Professional Ethics states: "An ACFE member shall continually strive to increase the competence and effectiveness of professional services performed under his or her direction." To comply with this requirement, individuals who become CFEs agree to complete 20 hours of continuing professional education each year. Course content is not specified in detail, but the requirement is that at least ten hours must be spent on technical subjects that contribute directly to fraud examination expertise, and at least two hours must relate directly to ethics. If the Certified Fraud Examiner fails to obtain the required continuing professional education, he is in violation of Article VIII of the Code.
Craig and Donna each own 40 percent of the shares of Indiewealth and serve on its board of directors. George is also a shareholder, but he is not a member of the board of directors. Donna dies, and her son, Steven, inherits her shares of Indiewealth and replaces her on the board. Steven, however, is inattentive to Indiewealth's corporate affairs. During this time, Craig diverts corporate funds for personal use, and consequently, Indiewealth becomes insolvent. If George decides to sue Steven for violating his fiduciary duties, under what theory is he likely to file the suit? Violating the duty of care. Violating the duty of loyalty. Violating the duty of reasonableness. Violating the duty of responsibility.
Violating the duty of care. Steven failed to act as a reasonably prudent director would under similar circumstances; therefore, George would likely file suit against Steven for violating his duty of care. People in a position of trust or fiduciary relationship—such as officers, directors, high-level employees of a corporation or business, and agents and brokers—owe certain duties to their principals or employers, and any action that runs afoul of such fiduciary duties constitutes a breach. The principal fiduciary duties are loyalty and care. The duty of loyalty requires that the employee/agent act solely in the best interest of the employer/principal, free of any self-dealing, conflicts of interest, or other abuse of the principal for personal advantage. The duty of care means that people in a fiduciary relationship must act with such care as an ordinarily prudent person would employ in similar positions.
As per ACFE Standards of Professional Conduct, which of the following requires a member not to disclose privileged information obtained during the course of an engagement without the express consent of the client or order of a court? client interest and equal treatment confidentiality and integrity professionalism and fair dealing due professional care and objectivity
confidentiality and integrity Confidentiality and integrity requires a member not to disclose privileged information obtained during the course of an engagement without the express consent of the client or order of a court.
As per ACFE Standards of Professional Conduct, the principle of ________ require a member not to commit discreditable acts and to always conduct themselves in the best interests of the profession. communication with the client understanding with client integrity and objectivity professional competence and confidentiality
integrity and objectivity The principle of integrity and objectivity requires a member not to commit discreditable acts and to always conduct themselves in the best interests of the profession
Which of the following is a primary driver of professional responsibility failure? practitioners relying on fellow members' work practitioners overestimating their respective skill sets practitioners subordinating individual judgement to professional rules practitioners specifically representing the engaging attorney's theory
practitioners overestimating their respective skill sets Practitioners overestimating their respective skill sets is a primary driver of professional responsibility failure.
Which of the following is an obligation that relates to professional responsibility? to always do exactly what a client wants no matter what the circumstances to ensure all financial processes of the organization are insulated from fraudulent activities cooperate with other professional members to improve the art of accounting, maintain the public's confidence to employ the degree of knowledge, skill, and judgment ordinarily possessed by members of the profession
to employ the degree of knowledge, skill, and judgment ordinarily possessed by members of the profession Professional responsibility includes employing the degree of knowledge, skill, and judgment ordinarily possessed by members of the profession.
