Practice prompt · Q:accounting-failures-institutions-and-market-judgment/auditor-independence-001

Identify an auditor-independence response

Distinguish independence in fact and appearance and require a safeguard responsive to the identified threat.

Updated Aug 7, 2026 Review due Nov 7, 2026

Practice

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Choose a response, then check the answer and explanation.

An engagement partner has a relationship that could affect—or appear to affect— objectivity. Which response is professionally defensible?

Choose the best answer. A Proceed because the partner personally believes the relationship will not affect objectivity. B Let management decide whether the auditor appears independent because management owns the statements. C Identify the financial, employment, business, family, advocacy, self-review, or management-participation threat; apply the governing framework; and remove, reduce, or decline the engagement when safeguards cannot address it. D Add more audit hours because audit effort always cures an independence impairment.

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Answer: C

Choice C. The analysis begins with the exact relationship and governing framework; a safeguard must respond to that threat, and some threats require removal or withdrawal.