CFE Ethical Obligations & Professional Conduct 4 — Questions and Answers
Question 1: A CFE learns during an engagement that the client is engaged in ongoing money laundering. The CFE should first:
- Complete the engagement and note it in the final report
- Immediately alert law enforcement without consulting anyone
- Consult with legal counsel about reporting obligations and disengage if necessary (Correct answer)
- Disclose the information to the media to protect the public
Correct answer: Consult with legal counsel about reporting obligations and disengage if necessary
Upon discovering ongoing crimes, a CFE should consult legal counsel to understand reporting obligations and consider withdrawing from the engagement.
Question 2: Which situation most clearly represents a violation of the CFE's duty of due diligence?
- Spending extra time reviewing documents beyond the engagement scope
- Failing to follow up on red flags identified during fieldwork (Correct answer)
- Declining an engagement due to lack of expertise
- Requesting additional evidence from the client
Correct answer: Failing to follow up on red flags identified during fieldwork
Ignoring identified red flags without follow-up is a failure of due diligence and violates the CFE's professional standards.
Question 3: Under the ACFE's ethical framework, a CFE who is also an attorney must:
- Prioritize legal ethics rules over ACFE standards in all cases
- Comply with ACFE standards even when they conflict with bar rules
- Follow whichever standard is more permissive in a given situation
- Comply with both sets of standards, with stricter rules governing (Correct answer)
Correct answer: Comply with both sets of standards, with stricter rules governing
A CFE who is also an attorney must comply with both the ACFE Code and bar association rules, adhering to whichever imposes the stricter obligation.
Question 4: A CFE is pressured by a client to exclude an unfavorable finding from a report. The ethical response is to:
- Omit the finding if the client provides a written indemnification
- Include the finding or withdraw from the engagement (Correct answer)
- Include a summary only, not the detailed finding
- Defer to the client's business judgment about what to report
Correct answer: Include the finding or withdraw from the engagement
A CFE must include all material findings or withdraw from the engagement; omitting them at a client's request compromises professional integrity.
Question 5: The concept of 'independence in appearance' for a CFE means:
- Wearing professional attire during testimony
- Avoiding situations that would cause a reasonable person to question objectivity (Correct answer)
- Maintaining physical distance from the subject of an investigation
- Disclosing all certifications on letterhead
Correct answer: Avoiding situations that would cause a reasonable person to question objectivity
Independence in appearance means avoiding relationships or circumstances that could lead a reasonable observer to doubt the CFE's objectivity.
Question 6: A CFE discovers evidence of fraud by a client's senior executive while performing unrelated consulting work. The CFE's obligation is to:
- Only report if specifically engaged to investigate fraud
- Inform appropriate parties within the organization or withdraw (Correct answer)
- Destroy the evidence to avoid becoming a witness
- Continue the consulting work and ignore the discovery
Correct answer: Inform appropriate parties within the organization or withdraw
Even when fraud is discovered incidentally, a CFE must inform appropriate parties within the organization or withdraw from the engagement.
Question 7: Which of the following is NOT a required element of competent professional conduct for a CFE?
- Completing engagements within agreed timeframes
- Maintaining current knowledge through continuing education
- Holding a law degree in addition to CFE credentials (Correct answer)
- Applying appropriate investigative methodologies
Correct answer: Holding a law degree in addition to CFE credentials
A law degree is not required for CFE competence; competence is defined by knowledge, skills, and diligence, not specific academic credentials beyond CFE requirements.
CFE Ethical Obligations & Professional Conduct 4
A CFE learns during an engagement that the client is engaged in ongoing money laundering.
The CFE should first: