Ethics & Professional Responsibilities Flashcards
7 cards from real CTP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Ethics & Professional Responsibilities flashcards as text
A CTP preparing a business return notices that the client's bookkeeper may have embezzled funds. The CTP's professional obligation is to:
Answer: Discuss the matter with the client and continue the engagement appropriately
The CTP's duty is to bring concerns to the client's attention; it is not the practitioner's role to investigate or report to law enforcement absent a specific legal duty.
The 'more likely than not' standard in Circular 230 means that a practitioner must believe the position has:
Answer: Greater than a 50% chance of being upheld
The 'more likely than not' standard requires the practitioner to conclude there is greater than a 50% probability that the position will be sustained on its merits.
A CTP who prepares a return with an Earned Income Tax Credit (EITC) claim has additional due diligence duties under IRC §6695(g), which include:
Answer: Completing IRS Form 8867 and keeping records of questions asked
IRC §6695(g) requires preparers to complete Form 8867 (Due Diligence Checklist), ask required questions, and retain records of the due diligence process for EITC, CTC, AOTC, and HOH claims.
If a CTP is disbarred from practice before the IRS, which of the following actions is the practitioner still permitted to take?
Answer: Advise clients privately on tax matters without direct IRS contact
Disbarment prohibits practice before the IRS but does not prevent a practitioner from privately advising clients on tax matters that do not involve direct IRS representation.
A CTP who knows that the IRS is examining a client's return may NOT:
Answer: Advise the client to destroy documents that may be requested by the IRS
Advising a client to destroy documents relevant to an IRS examination constitutes obstruction of justice and violates both law and Circular 230 ethical standards.
Under Circular 230, a practitioner who associates their name with a tax return or claim for refund is deemed to have:
Answer: Represented that the return is accurate to the best of their knowledge
By signing a return, a practitioner declares under penalties of perjury that the return is true, correct, and complete to the best of their knowledge and belief.
A CTP who accepts a Power of Attorney from a client gains the authority to do all of the following EXCEPT:
Answer: Unilaterally waive the client's right to appeal an IRS determination
A POA grants authority expressly stated on Form 2848; waiving a client's substantive appeal rights requires explicit client consent and cannot be done unilaterally by the practitioner.