American Institute of Certified Public Accountants (AICPA) Practice Exam

In which case would a CPA's independence remain intact?

1. Consulting for a client in a high-risk industry

2. Serving on the board of a charity that benefits from the firm

3. Providing accounting services to a family member who is a client

4. Advising a governmental body while auditing it

The correct answer is: Serving on the board of a charity that benefits from the firm

The situation where a CPA's independence remains intact is when serving on the board of a charity that benefits from the firm. In this scenario, the CPA can maintain independence as long as certain conditions are met. The charity is typically not a client of the CPA's firm and is not in a position to exert control or influence over the CPA’s firm in a manner that could impair objectivity. The nature of charitable organizations often allows for board service without compromising independence, particularly if the CPA's role does not create any significant financial interest or conflict of interest with the firm or its clients. For example, as long as the CPA does not have a controlling interest in the charity and their service on the board is purely voluntary and unrelated to any client engagements of the firm, independence is generally preserved. On the other hand, the other options present situations that could impair a CPA's independence. For instance, consulting for a client in a high-risk industry may expose the CPA to conflicts that could compromise their objectivity. Providing accounting services to a family member who is a client poses a potential conflict of interest due to the personal relationship. Advising a governmental body while auditing it presents a clear conflict, as the CPA’s impartiality in the audit could be questioned.