Ethical Standards & Professional Conduct Flashcards

A CTC's long-time client asks the practitioner to notarize a document and falsely attest to facts the practitioner knows are untrue. The correct response is to:

Answer: Refuse, as doing so would constitute fraud and violate professional ethics

Attesting to known falsehoods is fraud; no client relationship or indemnification agreement can ethically or legally justify such conduct.

Which of the following best describes the CTC's duty of competence?

Answer: Maintaining the legal, technical, and ethical ability to handle each specific engagement undertaken

Competence is a continuous, engagement-specific duty requiring that the practitioner possess or acquire the legal, technical, and ethical skills needed for each matter.

A practitioner's firm merges with another firm that represents a client with adverse interests. What must the practitioner do?

Answer: Conduct a conflict check and obtain informed written consent from affected clients or withdraw

A merger creates new conflicts of interest that require immediate conflict checks, and affected clients must provide informed written consent or the practitioner must withdraw from one representation.

What is the IRS Office of Professional Responsibility (OPR) primarily responsible for?

Answer: Enforcing Circular 230 standards of conduct for tax practitioners

The OPR is the IRS body that investigates practitioner misconduct and enforces Circular 230, including imposing sanctions such as censure, suspension, or disbarment.

A CTC prepares a return using a position that has a 15% chance of prevailing if challenged. Under Circular 230, what must the practitioner do?

Answer: Not sign the return; the position lacks the required realistic possibility of success

Circular 230 requires that a position have at least a realistic possibility of being sustained (roughly one-in-three) or, if disclosed, not be frivolous; a 15% chance fails both standards.

A CTC learns that a colleague in the same firm is helping clients commit tax fraud. What is the CTC's ethical obligation?

Answer: Take appropriate remedial action within the firm and, if necessary, refuse to participate or report through proper channels

Professional standards require the CTC to take internal remedial action, refuse participation in the fraud, and escalate appropriately — the response must be proportional and not condone the misconduct.

Which of the following is an acceptable basis for a CTC to withdraw from a client engagement?

Answer: The client refuses to follow the practitioner's advice to take an illegal deduction

A practitioner may withdraw when a client insists on a course of action the practitioner considers illegal or unethical, as continued representation would violate professional standards.