Auditing Theory and Practice Report 2022

Running head: AUDITING THEORY AND PRACTICE
AUDITING THEORY AND PRACTICE
Name of Student
Name of University
Author’s Note

AUDITING THEORY AND PRACTICE
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EXECUTIVE SUMMARY:
This report provides complete insight about the importance of the independency and objectivity
of the auditor. The report also showcased about the significance of the auditor-client relationship
in the quality of the report. The report also discussed about the auditing threats that may arise
when the company hires an external auditor. In order to safeguard the shareholder’s interest the
company needs to take certain steps, which will mitigate the auditing risk. This report discusses
such steps as well.

AUDITING THEORY AND PRACTICE
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Table of Contents
INTRODUCTION:..............................................................................................................3
INDEPENDENCE AND OBJECTIVITY OF AN AUDITOR:..........................................3
IMPORTANCE OF AUDITOR INDEPENDENCE IN AUDITOR-CLIENT
RELATIONSHIP:............................................................................................................................4
Biased Audits:..................................................................................................................4
Erroneous Report:............................................................................................................5
DISCUSSION OF THREATS:............................................................................................5
Self-interest Threat:.........................................................................................................5
Familiarity Threat:...........................................................................................................6
Management Threats:......................................................................................................6
Intimidation Threat:.........................................................................................................6
STEPS TO REDUCE THE AUDITOR’S INDEPENDENCE THREATS:........................7
Self-Interest Threat:.........................................................................................................7
The audit firm, its partners or staff have a financial interest in the audit client:.........7
There are family relationships between the firm, its partners, staff and the audit
client:.......................................................................................................................................7
Familiarity Threat:...........................................................................................................7
The audit firm has been the external auditor of the client for the past 10 years:.........7
Management Threats:......................................................................................................7
The audit firm provides non-audit services to the audit client:...................................7
Intimidation Threats:.......................................................................................................8
The audit firm is heavily financially dependent on one significant client:..................8
CONCLUSION:..................................................................................................................8
REFERENCES:...................................................................................................................9

AUDITING THEORY AND PRACTICE
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INTRODUCTION:
The process of inspecting the accuracy of the accounting statement of the company is
known as auditing. The entity that audits the financial report of the organisations and inspects the
accuracy based on the countries accepted standards, regulations and the laws is known as auditor.
The auditors present an independent opinion based on the accounting report of the business
entity. Ireland Auditing and Accounting Supervisory Authority (IAASA) is the Ireland’s
independent body who provides standards and regulations of auditing. This independent body of
Ireland also oversee the rules and regulations of the accountancy bodies in Ireland. The auditing
board of Ireland are responsible for the periodic financial reporting of the listed entities. This
board also focus on increasing the quality of the accounting standards of Ireland. Irish
accounting boards also acts as a special source of advice to the Minister of Jobs and Business
Enterprise. It is the Irish accounting board that also looks after the innovation in auditing and
accounting matters of the country. Irish auditors got complete independence over the inspection
of the financial records, financial statements and business transactions of a company. All these
are only possible if the auditor does not have any relationship with the client. Thus, this report
tries to investigate how the association between auditor and client affects the quality of the audit.
INDEPENDENCE AND OBJECTIVITY OF AN AUDITOR:
The primary purpose of an audit is to provide independent opinion on the annual report of
the company. The auditor is independent to provide opinion whether the annual report reflecting
true and fair value view of the company’s financial performance (Venkatadri et al 2018). An
auditor needs to have integrity, objectivity and scepticism while performing audit of a company.
The facts and circumstances related to the financial statements of the company may lead the
auditor to compromise the integrity, objectivity and the scepticism. The independency of an
auditor is considered as one of the most important part in the process of auditing (Abdullatif and
Kawuq 2015). The independency of an auditor is largely scrutinized based on the detailed rules
and regulations that are provided in the country’s accounting standard. The auditor independence
has evolved from principle based to rule based auditing. There are certain criteria, which can
determine the independency status of an auditor. The auditor should not hold any kind of