American Institute of Certified Public Accountants (AICPA) Practice Exam

What is the significance of an unpaid fee for a CPA's independence?

1. Always impairs independence

2. Only impairs if substantial and overdue

3. Never impairs if unrelated to audit services

4. Dependent on client's financial terms

The correct answer is: Never impairs if unrelated to audit services

The significance of an unpaid fee for a CPA's independence lies in the context of the relationship between the CPA and the client. If the unpaid fees are unrelated to audit services, they may not impair the CPA's independence. This is rooted in the principle that independence can be maintained when the outstanding payment does not pose a threat to the objectivity and impartiality required for performing audit functions. In scenarios where fees relate to services that are not part of the audit engagement, the concern for independence is diminished. The rationale is that the CPA can evaluate the audit evidence based on its own merits without being influenced by the financial relationship with the client. This understanding is crucial for CPAs as they navigate their responsibilities and the ethical challenges presented in their work. The other considerations highlight varying perspectives on unpaid fees. While significant and overdue fees can create situations where independence is questioned, the emphasis here is on the nature of the services related to those fees. In many cases, as long as the unpaid fees do not relate directly to the audit itself and do not affect the CPA's ability to provide an impartial audit opinion, independence is not considered impaired.