An auditor is assessing 'Independence' for a SOC engagement. Which of the following would impair independence?

Answer options:

The auditor owns stock in the service organization.

The auditor has audited the firm for 3 years.

The auditor uses the service organization's software for their own business at standard commercial rates.

The auditor is a CPA.

How to approach this question

Identify the financial conflict of interest.

Full Answer

A.The auditor owns stock in the service organization.✓ Correct

Independence is impaired if the auditor has a direct financial interest (like owning stock) in the client. This creates a conflict of interest where the auditor might be biased to issue a favorable report to protect their investment.

Common mistakes

Thinking using the product (at market rates) impairs independence.

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