Report on External Auditor Independence
Added on 2020-04-13
13 Pages3071 Words77 Views
Running head:EXTERNAL AUDITOR INDEPENDENCEExternal Auditor IndependenceUniversity NameStudent NameAuthors’ Note
2EXTERNAL AUDITOR INDEPENDENCETable of ContentsIntroduction................................................................................................................................2Section 1:....................................................................................................................................3Section 2:....................................................................................................................................4Section 3:....................................................................................................................................7Section 4:....................................................................................................................................9Conclusion................................................................................................................................10References................................................................................................................................11
3EXTERNAL AUDITOR INDEPENDENCEIntroduction The independence as well as objectivity of particularly internal as well as external assessorscan be observed both in auditing as specific attributes of strong corporate governance alongwith public sector financial management. Auditor independence indicates towardsindependence of specifically internal assessor else wise that of external auditor from specificparties that might have financial interest in the operations of the business. The current study intends to elucidate illustratively the definition and significance ofindependence of auditors in the role of external auditors. In addition to this, the study alsoexplains in detail the areas of risk to objectivity of external auditor and practical implicationsfor the external auditor in satisfying the demands of this specific aspect of the role of auditor.Moving further, the current section also presents exhaustively two real world instances ofspecific situations where the assessors of public corporations can be found to have breachedethical responsibilities. Section 1:Meaning of external auditor independence and importance of external auditorindependenceMeaning:The external auditor independence indicates towards independence of specific externalassessor that is necessary to the provision of an objective opinion on specifically truth andfairness of financial assertions. The assessors also have the need to be independent from theclient corporation so that the audit opinion will not be influenced by association betweenthem (Arens et al. 2012). The assessors are anticipated to provide an unbiased along withhonest expert opinion on financial declarations to the shareholders.
4EXTERNAL AUDITOR INDEPENDENCEImportance:The assessor have the need to be independent from mainly the client corporation in order toensure that audit opinion can be properly influenced by any kind of association between thetwo. In addition to this, the assessors are also expected to provide an unbiased along withhonest professional viewpoint on the financial assertions to all the shareholders. However,doubts are sometimes expressed as regards the independence of different external assessors(William Jr et al. 2016). Thus, it can hereby be argued that until and unless proper corporategovernance dimensions are instituted, a firm of assessors might arrive at audit opinions aswell as judgements that are deeply influenced by the aspiration to maintain good associationswith the client corporation. Essentially, if this happens, the assessor can no longer beregarded to be independent and the shareholders might fail to depend on their role. Arens etal. (2016) asserts that accounting corporations might participate in the process of setting feesfor audit at a rate lower than the market rate and make for the insufficiency by deliveringnon-audit services, for example, management consultancy along with tax guidance.Accordingly, some audit corporations also have commercial interests that have the need to beprotected as well. Essentially, this raises concerns that the assessor’s interests to shieldshareholders of a corporation and conflict interests might conflict with one another. According to Arens et al. (2015), an assessor is a scrutiny of the specific accounts by aqualified assessor that undertakes the operation of reviewing the figures. This activity canhelp in establishing the fact whether specific accounts reflect a true as well as fair view of theoutcomes together with the financial position of the corporation. As per the views of Toy andHay (2014), auditor independence indicates towards the attitude of the mind that is chieflycharacterised by factors of integrity and an objective approach to the entire audit procedure.Ge et al. (2016) mention that independent auditing can be considered to be a significant partof the corporate monitoring process since the period of 1930s. Council (2013) put forward he
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