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.

A. Only statement a is true

B. Only statement b is true

C. Both statements a and b are true

D. Neither statements a nor b are true

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 the auditor is independent of the employee benefit plan.

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

_________________________________________________________________________________________________________________________

1.

a. The auditor can audit the employee benefit plan without auditing XYZ Company.

b. Regardless of whether the auditor audits XYZ Company, the auditor must be independent of XYZ Company.

Answer: ______

2.

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

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

Answer: __________

3.

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

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

Answer: ___________