CB Professional Ethics & Standards 2 — Questions and Answers
Question 1: A bookkeeper discovers that a client has been systematically underreporting cash sales. What is the FIRST step the bookkeeper should take?
- Report the client immediately to the IRS
- Discuss the discrepancy privately with the client or management (Correct answer)
- Resign from the engagement without explanation
- Adjust the records to reflect correct amounts without informing anyone
Correct answer: Discuss the discrepancy privately with the client or management
The bookkeeper should first bring the discrepancy to the client's or management's attention internally before taking further action.
Question 2: Which principle requires a bookkeeper to avoid situations where personal interests could improperly influence professional judgment?
- Confidentiality
- Objectivity (Correct answer)
- Independence
- Professional competence
Correct answer: Objectivity
Objectivity requires that professional judgments be based on facts and evidence, free from personal bias or conflicting interests.
Question 3: A bookkeeper who accepts gifts from vendors in exchange for favorable payment terms is violating which ethical principle?
- Professional competence
- Due care
- Integrity (Correct answer)
- Confidentiality
Correct answer: Integrity
Integrity prohibits accepting gifts or inducements that could compromise or appear to compromise professional judgment.
Question 4: Under AIPB standards, a Certified Bookkeeper who performs work they are not qualified to do is violating the principle of:
- Integrity
- Confidentiality
- Professional competence and due care (Correct answer)
- Objectivity
Correct answer: Professional competence and due care
Professional competence and due care require bookkeepers to only undertake tasks for which they have adequate training and skills.
Question 5: A client asks their bookkeeper to back-date invoices to shift revenue into a prior accounting period. The bookkeeper should:
- Comply if the client provides written authorization
- Refuse, as this constitutes financial statement fraud (Correct answer)
- Comply only if the amounts are immaterial
- Consult a tax professional before deciding
Correct answer: Refuse, as this constitutes financial statement fraud
Back-dating invoices to manipulate reported revenue is fraudulent regardless of the client's instructions or the amounts involved.
Question 6: Which of the following BEST describes the concept of 'due care' in bookkeeping ethics?
- Completing work as quickly as possible to meet client deadlines
- Exercising diligence, thoroughness, and technical competence in all professional activities (Correct answer)
- Avoiding any situation that could result in a client dispute
- Maintaining client records for a minimum of seven years
Correct answer: Exercising diligence, thoroughness, and technical competence in all professional activities
Due care means performing professional duties with diligence and competence, taking sufficient time to ensure accuracy and quality.
Question 7: A Certified Bookkeeper switches employers and is asked by the new employer to share financial details of former clients. The bookkeeper should:
- Share only summary information, not detailed records
- Decline, as client confidentiality obligations survive the end of an engagement (Correct answer)
- Share the information if the new employer signs a non-disclosure agreement
- Consult with the former employer first before deciding
Correct answer: Decline, as client confidentiality obligations survive the end of an engagement
The duty of confidentiality to former clients continues after the professional relationship ends and prohibits sharing their financial information.
CB Professional Ethics & Standards 2
A bookkeeper discovers that a client has been systematically underreporting cash sales.
What is the FIRST step the bookkeeper should take?