Sign Up Now
Get instant access to over 1 million+ study documents
OR
Already registered? click here to login
By creating your account, you agree to our terms of service, privacy policy and student honor code.
Importance of Independence of Auditor and Client:
During financial statement engagements, the independence of auditors and clients is important because of the following reasons & #8230;
Lesser Inappropriateness:
The closer the relationship between an auditor and his/her client is the higher the probability and perception of inappropriateness. Through an examination of various studies and the wider implications of such relationship, the independence between auditor and client is the most effective way of lessening inappropriateness. This is primarily because such independence promotes and sustains integrity during the financial statement audit engagements.
Promotion of Reliability:
The main goal of independence between auditor and client during audit engagements is to promote reliability through providing an independent and objective view of the financial statements. The independence of the auditor assists in ensuring quality audits and contributes to reliability of the client's or user's financial statements on the financial reporting process. Reliability of the audit process is promoted because auditors have the ability to render unbiased audit decisions while clients evaluate the statements freely. The result of such initiatives is promotion of user reliance on the audit process and enhancing the efficiency of the capital market (Lindberg & Beck, 2002). The financial position of an audit...
This confidence is attained through measures to maintain objectivity and integrity by the auditor and the client's independent and objective evaluate.
Conclusion:
The independence between the auditor and client has become an important aspect of the accounting and auditing profession. This concept has largely been fueled by recent events in several corporations in which the reliability of financial statements have been compromised. it's important for the auditing process to incorporate independence of both parties because of its impact on the quality of financial statements.
References:
Greene, H.E. Accounting News: Auditor Independence. Retrieved from Federal Deposit
Insurance Corporation website: http://www.fdic.gov/regulations/examinations/supervisory/insights/siwin06/accounting_news.html
Lindberg, D.L. & Beck, F.D. (2002, November). CPAs' Perceptions of Auditor Independence:
An Analysis of Views Before and After the Collapse of Enron. Retrieved May 18, 2012, from http://aaahq.org/audit/midyear/03midyear/papers/AuditorIndep-paper1-AuditingSection.isu.pdf
The value of audit is therefore noted to be derived wholly from its independence. Without the concept of independence, the auditors are noted to lack both credibility and opinion. The nature of relationship that exists between a client and an auditor is by itself a threat to the concept of independence. Incidents of influencing the auditor reports on the financial position of clients have been noted to result due
Independence of Auditors The objective of this study is to consider the statement as follows: "Unquestionably, the HIH story is also one of auditor failure" and to research into the background of the HIH collapse in Australia insofar as it relates to the role of auditors and their liability. A report will be prepared with summaries of the most important documents concerning this issue of auditor independence after the HIH collapse,
During a routine investigation, one the actuaries discovers that there are some possible red flags for illegal activity. When they report these issues to their supervisors, they are told to not worry about that. What make this so troubling is auditors have an ethical duty, to protect the interests of their clients and the public. The problem is that they want to remain a part of the team. Yet,
Management v. Auditors Responsibility Responsibilities of Management and Auditors & the Public Perception series of high-profile business melt-downs in 2001, led by the Enron scandal have put the roles and responsibilities of the corporate management and the auditors in sharp focus. The public outcry against the necessity of preventing such crises in future has led to stricter regulation and extensive debate about the responsibilities of the management and the auditors. In
auditing comes with immense responsibility as it plays a vital role in maintaining a check and balance and establishes an organization's credibility and repute among its stakeholder. An auditor's report is a key document that most stakeholders use when taking decisions pertaining to an organization. For this it is important for auditors to show highest levels of compliance with ethics. Auditors and Ethics Audit and Ethics have a very deep relationship
Ethics and Independence in the Accounting Profession There are according to the text, two primary reasons that people act unethically. A person will act unethically if there standards differ substantially from those of society "as a whole" or if the person chooses consciously to act in a selfish manner. There is no profession more profoundly impacted by the effects of ethical standards that the accounting profession. The effects of ethical and unethical