American Institute of Certified Public Accountants (AICPA) Practice Exam

How does providing office amenities to a former practitioner affect independence?

1. It strengthens independence

2. It creates an appearance of participation

3. It has no effect on independence

4. It is strictly prohibited

The correct answer is: It creates an appearance of participation

Providing office amenities to a former practitioner can create an appearance of participation, which is crucial to understand in the context of independence. Independence is fundamental for auditors and accountants, as it ensures that their judgments are not influenced by external factors. When an accounting firm provides amenities or benefits to a former practitioner, it may lead to the perception that the firm is involved in a relationship that could compromise its objectivity and impartiality. This appearance of participation could make stakeholders question the integrity of the auditor's work, as it might seem that the former practitioner could have undue influence or favoritism in future engagements or decisions made by the firm. Maintaining a clear boundary and ensuring that there are no perceived influences is essential in upholding independence. While the act itself may not necessarily affect the actual independence of the firm, the perception it creates can have significant implications for trust and credibility with clients and the public. In contrast, strengthening independence or having no effect on independence does not accurately reflect the nuanced nature of how such a situation could be viewed by external parties. The idea that it could be strictly prohibited overlooks the potential for context-specific arrangements where some amenities might be permissible, but must be managed with care to avoid any appearance of impropriety.