Auditing and Assurance: Assignment

1
By student name
Professor
University
Date: 07 January 2018.
Contents
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Risk and Independence of Auditor and threats to Auditors Independence.................3
Failure of Enron, Worldcom and Lehman Bros............................................................6
References................................................................................................................. 9
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Risk and Independence of Auditor and threats to Auditors
Independence
Introduction
Auditors independence refers to the independence of the auditors from all such
sources whether internal or external that may have some financial interest in the
company. These sources might influence the overall audit and cause the auditor to
falsify the audit results. It is thus important that auditor must be unbiased and free
from all such influence (Bena, Ferraira, Matos, & Pires, 2017). It is very important for
the overall validity of the audit engagement and helps in generating true and
accurate results on the financial standing of the company. A lot of importance have
been placed on making this fact clear and price that the auditor must be
independent in his approach while conducting the audit of an entity. There are
various risk elements that possess a great threat to the overall independence of the
auditor. A detailed explain on the same is given below.
Analysis
Key audit risks refer to the risk that the financial statements may not be correct and
fail to provide a true and fair view of the position of the company. This occurs when
there are some material misstatements in the reports of the company (Alexander,
2016). The two aspects of audit risks are risk of material misstatement and
detection risk. Audit risks carry great liability for the auditors of the company as the
stakeholders depend on these audit reports to take vital decisions. It is the duty of
the auditor to safeguard the company from any such risks and provide the most
accurate result possible.
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