American Institute of Certified Public Accountants (AICPA) Practice Exam

Does engaging in consulting services for an attest client impair independence?

1. Yes, always

2. No, if there are no conflicting interests

3. Only if the consulting creates bias

4. Depends on the nature of the consulting

The correct answer is: Only if the consulting creates bias

Engaging in consulting services for an attest client can potentially impair independence, and the premise of the correct answer revolves around the concept of bias. When a CPA provides consulting services, the nature of those services is critical to determining if independence is compromised. The main concern is whether the consulting creates a situation where the CPA's objectivity is affected, which is often characterized by a bias in judgment or decision-making regarding the client. If the consulting engagement leads to the CPA making decisions or exercising influence over financial reporting or internal controls, this creates a conflict of interest and can bias the findings or opinions provided in the attest function. In other words, if a CPA is involved in both consulting and auditing, there is a risk that the judgment made during the attest process could be swayed by the consulting recommendations or findings. Therefore, the correct answer emphasizes the significance of bias—not just the existence of consulting services. Depending on the specifics of the consulting engagement, such as what is recommended or how decisions are made, it can create an opportunity for bias that ultimately detracts from the independence required in attest functions. This nuance reflects the need to assess each situation individually to determine if independence is truly compromised.