Concepts of Independence and Objectivity in External Audit Process

Auditing

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
Concepts of independence and objectivity in the context of external audit process...................1
Professional guidelines to make sure the independence and objectivity of auditors...................1
Evaluation of both level of external auditor independence and role of financial reporting
councils in UK.............................................................................................................................2
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Auditing may be carried out by staff or members of a specific department directly either by
an outside company or an independent auditor externally (Barr-Pulliam, Brown-Liburd and
Sanderson, 2020). The principle is to audit and confirm an autonomous council's records and
insure that all accounting records are handled in a respectable way therefore there is no
misstatement or cheating being carried out. In this report, concepts, guidelines of objectivity and
independence for audit process and auditor is discussed. In addition, report also defines the
evaluation of external auditor independence and role of FRC in UK is also elaborated.
TASK
Concepts of independence and objectivity in the context of external audit process.
Concept of Independence
Auditing independence include independence of an external or internal auditors from the party
that have interest in financial statements of the company. Independence is important in auditing
as it helps to protect the interest of shareholders and investors of the company. External Audit is
done by the organisation to ensure that annual reports presented by the organisation give true
value to the shareholders and investors and also ensure that the funds are utilised in a correct
manner. External audit should be independent as an external person recheck your accounts and
can find the area a business need to improve. It also decreases the chance of fraud activity and
give true picture of the organization's financial position to the person who may have interest in
the financial statement of the organization. Independent external audit provides unbiased
accounting which is good for the organisation and it increase the credibility for the shareholders.
This include three types of independence– Programming Independence, Investigating
Independence, Reporting Independence. In programming independence, the auditor is free to
choose any specific strategy to conduct audit. It means he is free to check any document.
Investigating independence include implementing the strategy that is previously chosen by
external auditor. He is free to access any information related to company by any person of the
company. And in reporting independence, the auditor is free to disclose any accounting
information. Sometimes the directors of the company hide some information to shareholders, so
in this independence the auditor is free to disclose any information to the shareholders.
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