Video: Governmental Engagement Ethics Practice Questions

In this lesson, Nick Palazzolo examines various situations and scenarios related to governmental engagement ethics, specifically focusing on auditor independence. Through a series of practice questions, he explains the importance of independence in the context of auditing financial statements for employee benefit plans. The lesson goes in-depth on aspects such as having an investment advisor from the auditor's firm working on the plan, an auditor obtaining a material and indirect financial interest in the employee benefit plan, and the auditor's spouse obtaining an immaterial direct financial interest. By analyzing each scenario, Nick clarifies the rules around independence and professional engagement.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Well, it's everyone's favorite governmental engagement ethics. Let's dive in and see some situations, scenarios that will require us to put a little deductive reasoning as well as, as always, straight remember facts we've learned. Beginning here, in which of the following situations would an auditor who is rendering an audit opinion on the financial statements of an employee benefit plan that will be filed with the Department of Labor be considered independent? I'm going to lead you into a tip and trick here. So many of these questions will be, oh, in the PCAOB, or in the AICPA, or in the Department of Labor, or in a governmental audit. All of this multitude of situations. But guess what? Independence is pretty straightforward and universal across the board. So you can't be auditing your own work. You need to, actually, I'm just going to pause the video. You can't be auditing your own work. And I'll show you how that plays into this, as well as you can't have a direct material interest in something that you should be independent from. So a member of the auditor's firm was an investment advisor to the employee. So employee benefit plan, right? So governments are the only ones with pensions these days. I mean, I'm not going to pension anytime soon for any companies I've worked at. So those pensions have employee benefit plans, which are, you can think of them like their own companies, right? I mean, they're being invested, they're growing, and that money belongs to the governmental employees and gets paid out. So that's the whole shtick, right? The nature of it. So it's very important that when they get audited, they make sure the money's not being invested in what they say it's being invested in, and the

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Ethics & Independence

Module: 3 Concepts, 42 Videos

AICPA Code of Professional Conduct Overview

1:04

AICPA Code of Professional Conduct Objectives

2:42

Introduction to AICPA Code of Professional Conduct

1:55

AICPA Requirements of Independent Auditors