American Institute of Certified Public Accountants (AICPA) Practice Exam

Does serving on a governmental advisory committee impair a partner's independence when auditing that government?

1. Yes

2. No, independence is not impaired

3. It depends on the committee's findings

4. Only if the findings affect the audit

The correct answer is: No, independence is not impaired

When a partner serves on a governmental advisory committee, independence is not automatically impaired as long as certain safeguards are in place and the relationship does not compromise the objectivity of the audit. The AICPA establishes guidelines that define independence related to the audit of entities, which typically focus on the nature of the relationship and the role that the partner has with the government entity. Serving in an advisory role often suggests a level of involvement that, while significant, may not constitute decision-making authority or direct influence over financial reporting of the government entity being audited. As long as the partner maintains an appropriate level of separation between their advisory functions and the audit responsibilities, independence can be preserved. Situations that could impair independence typically involve direct financial interests or significant decision-making capacities within an entity the auditor is evaluating. However, serving purely in an advisory capacity, provided there are clear boundaries and disclosures, does not inherently violate the principles of independence. Other considerations, such as the nature of the committee's findings or the impact they may have on the audit, do not govern the fundamental principle of independence but could lead to the need for further evaluation of any specific circumstances that arise during an audit engagement. Thus, stating that independence is not impaired aligns with the regulatory standards governing auditor behavior