The following scenarios relate to an audit of an employee benefit plan subject to the Employee Retirement Security Act of 1974 (ERISA). The audit is conducted under the independence rules of the Department of Labor and other appropriate guidance. For each scenario below, select from the option list provided to indicate whether statements a. and b. are true.

Each choice may be used once, more than once, or not at all.

1. At the time of the audit of the employee benefit plan, the auditor had a financial interest in the plan.

2. The auditor is auditing the employee benefit plan of XYZ Company, the plan sponsor.

3. The auditor of the employee benefit plan provides additional services for the plan.

4. The auditor is considering whether (s)he is independent of the employee benefit plan.

5. The auditor is seeking advice about independence issues for auditing employee benefit plans.

1.Only Statement a is true

2.Only Statement b is true

3.Both statements a and b are true

4.Neither statements a nor b are true

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a. The auditor may design and implement internal controls for the plan and maintain independence.

b. The auditor may make disbursements on behalf of the plan and maintain independence.

answer:

a. As long as the auditor removes an independence violation by the time the report is issued, the auditorwould be considered independent.

b. Auditor independence would be impaired if the auditor made policy decisions for the plan.

answer:

a. The auditor should consider the Department of Labor guidelines for determining independence.

b. The auditor should consider the AICPACode of Professional Conductfor determining independence.

answer:

a. The auditor may have a direct financial interest in the benefit plan and maintain independence.

b. The auditor may have an immaterial indirect financial interest in the benefit plan and maintain independence.

answer: