American Institute of Certified Public Accountants (AICPA) Practice Exam

How does a connection between a partner or professional employee and a client affect independence?

1. Independence is enhanced by close connections.

2. Independence is not affected by personal connections.

3. Independence is impaired in such circumstances.

4. Independence is only affected in cases of direct financial interests.

The correct answer is: Independence is impaired in such circumstances.

The correct understanding of how a connection between a partner or professional employee and a client affects independence lies in the recognition that such personal relationships can compromise objectivity. When a professional has a close connection with a client, whether through personal relationships or familial ties, the potential for bias increases. This bias can influence the professional's judgment and the integrity of the services provided. Independence is a fundamental principle in the accounting profession, ensuring that auditors and other professionals maintain an objective perspective free from conflicts of interest. Close relationships may lead to situations where the professional may feel inclined to favor the client’s interests over ethical obligations or regulatory requirements, thus impairing their ability to act independently. This impairment is particularly significant in situations where decision-making must be unbiased, as the risk of divided loyalties or perceived favoritism can diminish the trust and reliability that clients and the public have in the professional’s work. The concept holds that to uphold professional standards and maintain public trust, it is critical to avoid any connections that could impair independence. On the other hand, the other options suggest scenarios where independence remains intact or even enhanced, which does not align with the principles governing professional conduct in accounting. These misunderstandings could lead to a lack of awareness about the importance of maintaining