Certified Government Auditing Professional (CGAP) Practice Exam

Which statement about personal impairment to independence under GAGAS is not true?

1. Preconceived ideas about an audited organization can be a personal impairment.

2. All personal relationships with employees of the client create a personal impairment.

3. Non-audit work that violates specific overarching principles is an impairment.

4. Personal impairment may exist even if overarching principles are not violated.

The correct answer is: All personal relationships with employees of the client create a personal impairment.

The assertion that not all personal relationships with employees of the client create a personal impairment is accurate. Under the Generally Accepted Government Auditing Standards (GAGAS), personal impairments to independence can vary in impact based on the nature and degree of the relationship. While certain close personal relationships might compromise an auditor's objectivity and integrity, not every relationship with a client's staff will necessarily lead to a personal impairment. The concept of personal impairment primarily centers around the potential influence that a relationship could have on the auditor's judgment. If the relationship is professional and does not create a conflict of interest or an obligation to any employee, it may not be considered an impairment. Therefore, the statement accurately reflects the understanding that independence is context-dependent and not automatically forfeited by any existing relationship with client personnel. This allows auditors to maintain their independence and objectivity as long as they are mindful of the potential influence of their relationships and take appropriate measures to mitigate any risks.