The finite element method has been used to study the behavior of an aluminum alloy during elastic-plastic indentation by a rigid conical indenter to determine how the indentation process is affected by residual stress. The study was motivated by recent experimental results which showed that the hardness and elastic modulus of the alloy measured using nanoindentation methods appeared to decrease as the residual stress was increased. Biaxial radial stress was applied as a boundary condition, and indentation load-displacement curves were generated and analyzed according to various accepted methods for measuring hardness and modulus. The results of the study show that the standard methods by which hardness and elastic modulus are measured can lead to inaccuracies because they do not account for pile-up in the contact area calculations. Furthermore, if the contact area is measured properly, then hardness and elastic modulus are not significantly affected by residual stress.