🧾 Task-Based Simulation: Evaluating Auditor Independence
Scenario:
You are a senior auditor at the public accounting firm Bright & Co. The firm is preparing to accept a new audit engagement with a privately held manufacturing company, GreenSky Corp. As part of the client acceptance procedures, you are required to evaluate potential threats to auditor independence based on the relationships and financial interests disclosed by team members.
Instructions:
For each situation listed below, indicate whether auditor independence is impaired or is not impaired.
| Situation | Independence Impaired? (Yes / No) |
|---|---|
| A. The engagement partner’s spouse owns $1,000 worth of GreenSky Corp. stock in a retirement account. | Yes |
| B. A staff auditor on the team previously worked as GreenSky’s internal auditor and left the company 6 months ago. | No |
| C. A partner in a different office of Bright & Co. provides tax services to GreenSky Corp. but is not involved in the audit. | No |
| D. The engagement manager received a job offer from GreenSky during the audit and has not yet responded. | Yes |
✅ Explanations
- A: A spouse is considered an immediate family member. Even if the stock is held in a retirement account, any direct financial interest in an attest client impairs independence.
- B: Former employees of the client may participate in the audit if enough time has passed and they no longer influence the client. A 6-month gap is generally considered sufficient.
- C: A partner in a different office who is not involved in the engagement is not considered a covered member. Therefore, independence is not impaired.
- D: Receiving a job offer from an audit client impairs independence unless the auditor promptly notifies the firm and is removed from the engagement until the issue is resolved.
