American Institute of Certified Public Accountants (AICPA) Practice Exam

Can a CPA firm assist in the performance of a client's internal audit function?

1. Yes, always

2. No, never

3. Yes, with certain conditions

4. Only if approved by SEC

The correct answer is: Yes, with certain conditions

A CPA firm can assist in the performance of a client's internal audit function under certain conditions. This is recognized as an area where CPA firms must adhere to specific independence and objectivity standards. When a CPA firm provides internal audit services, it must ensure that its involvement does not impair its independence regarding any external audits it may perform for the same client. This typically involves maintaining a separation of duties and avoiding situations where the CPA firm is essentially auditing its own work. The firm must also consider the nature and extent of the services provided, and whether these might create a conflict of interest. Compliance with applicable professional standards, including ethical guidelines set by the AICPA, is vital in determining how a firm can engage with its client's internal audit processes. As such, while CPA firms can assist with internal audits, they must do so while upholding professional integrity and regulations governing such services. This nuanced approach allows for collaboration between CPA firms and clients in enhancing internal control processes, while still ensuring that the audit function remains objective and independent.