Certified Government Auditing Professional (CGAP) Practice Exam

Under GAGAS, what type of nonaudit service is not allowed for the auditor to provide?

1. Propose adjusting and closing entries during an audit

2. Maintain or prepare audited entities' basic accounting records

3. Provide human resources services, short of recommending individuals

4. Assist a legislative body by developing questions for use at a hearing

The correct answer is: Maintain or prepare audited entities' basic accounting records

The answer identifies a key principle under the Generally Accepted Government Auditing Standards (GAGAS), which emphasizes the auditor's independence and objectivity when conducting audits. Maintaining or preparing the accounting records of an audited entity can create a conflict of interest and undermine the auditor's ability to remain impartial. If auditors are involved in the preparation of a client's financial records, it can lead to a situation where they are auditing their own work, which compromises the integrity of the audit process. In contrast, other nonaudit services listed do not inherently breach independence requirements. Proposing adjusting and closing entries can be acceptable, provided the auditor does not have decision-making authority. Providing human resources services, as long as it does not involve recommending individuals for a position, can help support a government entity without impacting auditor independence. Assisting a legislative body in developing questions for hearings does not involve preparing or modifying records and instead relates to enabling effective oversight, so this role aligns with the responsibilities of auditors without compromising their independence.