CPA AUD Practice Test

CPA AUD Ethics & Independence Practice Questions

Ethics & Independence makes up 6 of every 50 questions on a Tigertest CPA AUD practice test. Here are 10 of the 24 questions on it, each with the answer and the reason.

Updated 2026-11-10 by the Tigertest team. Based on the AICPA's 2026 AUD blueprint. Original multiple-choice questions; simulations not included. Not affiliated with the AICPA, NASBA or the PCAOB.

1. 1. Under the AICPA Code's conceptual framework, a CPA who identifies a threat to independence should first:

   • A.Ask the client to remove the threat
   • B.Evaluate whether it is acceptable
   • C.Resign from the engagement at once
   • D.Disclose it in the auditor's report

   Answer: B. The conceptual framework asks the member to identify a threat, evaluate its significance, and, if it is not at an acceptable level, apply safeguards. Resigning is only needed when no safeguard reduces it enough.

2. 2. A staff auditor's spouse owns a small number of shares in an audit client, and the staff auditor is on the engagement team. Under the AICPA Code, independence is:

   • A.Impaired only if material
   • B.Not impaired for a spouse
   • C.Not impaired, as it is immaterial
   • D.Impaired, as a direct interest

   Answer: D. A covered member's immediate family (spouse, spousal equivalent, dependents) is treated as the member. Any direct financial interest in an attest client impairs independence, however small.

3. 3. The brother of an audit engagement partner holds shares in the audit client that are material to the brother. Under the AICPA Code, independence is:

   • A.Impaired, as a material interest
   • B.Impaired only if he works there
   • C.Not impaired, as he is not family
   • D.Impaired for any amount

   Answer: A. Siblings, parents and nondependent children are close relatives. A close relative's financial interest impairs independence when the covered member knows of it and it is material to the relative or gives significant influence.

4. 4. A CPA firm's fees for last year's audit of a nonissuer are still unpaid when it is about to issue this year's report. Under the AICPA Code, independence is impaired if the fees are unpaid for more than:

   • A.Six months after year-end
   • B.Two years before the report date
   • C.One year before the report date
   • D.Ninety days after billing

   Answer: C. Unpaid fees for professional services rendered more than one year before the date of the current year's report are treated as a loan to the client and impair independence.

5. 5. Which fee arrangement is prohibited for a CPA who performs an audit for the same client?

   • A.A fixed fee agreed in advance
   • B.A fee set by a court
   • C.A fee contingent on a result
   • D.A fee based on hours worked

   Answer: C. Contingent fees are prohibited for any client for whom the member performs an audit, review or examination. Fees fixed by courts or public authorities are not contingent fees.

6. 6. An auditor of a nonissuer also prepares the client's journal entries from source documents. Independence is not impaired if the client:

   • A.Takes responsibility for the entries
   • B.Has an internal audit function
   • C.Lets the auditor approve every entry
   • D.Pays a separate fee for the work

   Answer: A. Nonattest services are allowed when the client accepts responsibility for the results and management does not hand management responsibilities to the auditor. Approving the entries would be a management responsibility.

7. 7. Before performing a nonattest service for an attest client, the AICPA Code requires the client to designate someone who:

   • A.Prepared last year's statements
   • B.Is a licensed CPA in that state
   • C.Sits on the audit committee
   • D.Has suitable skill or experience

   Answer: D. Management must designate an individual with suitable skill, knowledge and/or experience to oversee the service. That person need not be able to perform or reperform the service.

8. 8. Which nonaudit service may the auditor of an issuer perform for that client, with audit committee preapproval?

   • A.Appraisal of acquired assets
   • B.Tax compliance services
   • C.Bookkeeping services
   • D.Internal audit outsourcing

   Answer: B. The SEC lists services that impair independence for an issuer's auditor, including bookkeeping, internal audit outsourcing, and appraisal or valuation. Most tax compliance work is allowed if the audit committee preapproves it.

9. 9. Under SEC rules, the lead audit partner on an issuer's audit must rotate off the engagement after:

   • A.Ten consecutive years
   • B.Five consecutive years
   • C.Three consecutive years
   • D.Seven consecutive years

   Answer: B. The lead and concurring partners rotate after five consecutive years and then observe a five-year time-out. Other audit partners rotate after seven years with a two-year time-out.

10. 10. An issuer's audit committee should preapprove which services from its auditor?

    • A.Only the annual audit itself
    • B.Only work billed above a set fee
    • C.Only nonaudit services over a cap
    • D.Audit and permitted nonaudit work

    Answer: D. Under the Sarbanes-Oxley Act, the audit committee preapproves all audit services and all permitted nonaudit services provided by the registered public accounting firm.