The Importance Of Auditor Independence On An Audit

Why is it important for external auditors to be independent? Relate your answer to the primary role of external auditors. Give examples of specific ways the lack of auditor independence may impact adversely on an audit. Auditing is one of the most essential processes that has to be executed in the business world. It involves independent testing on the documents of a business to establish the financial statements are prepared without any material misstatements and maintained as the law requires. This process is carried out by an auditor; a person or a firm that has been certified by the regulatory authority of auditing. Internal auditors and external auditors are the two types of auditors generally appointed by companies. Internal auditors are employed by the organisations they audit to carry out the internal activities such as, risk managements, monitoring efficiencies, detecting any fraudulent acts and organisational governance. Whereas, external auditors are independent completely from the entity they are auditing for. Auditors have to be independent, where the process has to be free from outside control and interference by any parties. They should not be subject to another’s jurisdict ion. The degree of independence varies among external and internal auditors as the former is expected to be more uncontrolled as they prepare report for all users of financial statements whereas the latter reports only to the management of the organisation they audit. This essay willShow MoreRelatedThe Sarbanes Oxley Act Of 20021530 Words   |  7 Pagesconcerns on auditor independence. The Sarbanes-Oxley Act of 2002 includes rules on auditor responsibility and independence. The PCAOB designed policies on auditors’ ethical behavior and independence. The AICPA Code of Professional Conduct contains Section 101 – Independence that describes requirements for the auditor during engagements. The regulators establish principles and standards of the accounting profession, but the number of financial scandals continue increases due to the audit failure. TheRead MoreWhy Is It Important for External Auditors to Be Independent? Relate Your Answer to the Primary Role of External Auditors. Give Examples of Specific Ways the Lack of Auditor Independence May Impact Adversely on an Audit.1648 Words   |  7 PagesTerm: Individual Coursework Essay Topic: Why is it important for external auditors to be independent? Relate your answer to the primary role of external auditors. Give examples of specific ways the lack of auditor independence may impact adversely on an audit. In 2001, there was an event that had shaken the whole business world. The crash of Enron in US, followed by worldwide collapse of its auditor, Arthur Andersen. It was a greatest corporate failure uncovered in business historyRead MoreThe Objective Of Auditing Standard918 Words   |  4 Pagesthe auditor plans the audit so it can be conducted efficiently. The engagement partner is responsible for planning the audit and making sure it is performed. If the engagement partner seeks assistance from engagement team members he or she is responsible for making sure they comply with the requirements for this standard. Planning the audit is not a short-term task and often should be started after the completion of the previous audit and continue to until the completion of the current audit. DuringRead MoreWhy Is It Important for External Auditors to Be Independent? Relate Your Answer to the Primary Role of External Auditors. Give Examples of Specific Ways the Lack of Auditor Independence May Impact Adversely on an Audit.1638 Words   |  7 PagesCoursework Essay Topic: Why is it important for external auditors to be independent? Relate your answer to the primary role of external auditors. Give examples of specific ways the lack of auditor independence may impact adversely on an audit. In 2001, there was an event that had shaken the whole business world. The crash of Enron in US, followed by worldwide collapse of its auditor, Arthur Andersen. It was a greatest corporate failure uncovered in businessRead MoreIndependence of External Auditor1203 Words   |  5 PagesIndependence of external auditor By:- shubham kanchhal Auditor independence  refers to the independence  of the auditor  from parties that may have a financial interest in business being audited. Independence requires integrity  and an objective approach  for the audit process. This concept requires the auditor  to carry his work freely and in an objective manner. The purpose of an audit to enhance the credibilityRead MoreWhy is it important for the external auditor to be independent?1495 Words   |  6 Pagesis it important for external auditor to be independent? Throughout the years, banks, shareholders, possible investors and creditors always relied on the financial statements produced by a company. Since the management of a company is producing these documents it has been assumed that the managers may act dishonestly so that their performance looks better. To monitor the company’s performance better the directors along with the shareholders employ external auditors to check all these financialRead MoreThe Code of Professional Conduct for Auditors1516 Words   |  6 Pagesexpectations and builds a framework to guide their members in all actions and operations. The code of professional conduct for auditors is one of extreme importance. The six main principals include the following: responsibilities, the public interest, professional due care, objectivity and indepdence, integrity, and the scope and nature of services. The manner in which an auditor performs and incorporates these six principals in his or her duties has a great eff ect on how they are viewed by clients,Read MoreAuditor’s Role: The Importance to Overcome Ethical Dilemmas Essay example1030 Words   |  5 Pagesemployees and the whole U.S. economy. Most of these scandals would have been prevented, if the independent audits of these companies were conducted in an ethical manner. With this in mind, two corporate scandals will be the subjects of further review to understand that an auditor might encounter ethical dilemmas, if independence and objectivity are not part of the audit process. An auditor should keep objectivity at all times. Maire Loughran, a Certified Public Accountant and University ProfessorRead MoreThe Importance of External Auditor’s Independence Essay1614 Words   |  7 PagesThe Importance of External Auditor’s Independence According to Gillespie, Lewis and Hamilton (2004:221) an audit is: â€Å"a scrutiny of the accounts by a qualified auditor who carries out checks on the figures so as to establish whether the accounts show a true and fair view of the results and the financial position of the entity.† According to Wikipedia (2011a), auditor independence refers to â€Å"an attitude of mind characterized by integrity and an objective approach to the audit process†. IndependentRead MoreInternal Audit Department s Independence And Objectivity1245 Words   |  5 Pagesabout the internal audit department’s independence and objectivity. I have provided detail on consideration of independence and objectivity, based on guidance from the International Institute of Internal Auditors (IIA). I have also charted steps should taken by TechNet to ensure the internal audit department’s independence and objectivity. The Institute of internal Auditors (IIA) defines independence as â€Å"the freedom from conditions that threaten the ability of the internal audit activity to carry