Group Assignment: Auditor Independence

Subject Code: 3102AFE
Subject Name: Auditing
Assessment Title: Group Assignment: Auditor Independence

Table of Contents
Part A...............................................................................................................................................3
Independence of the auditor.........................................................................................................3
Part B...............................................................................................................................................5
Implementation of the safeguard for the reduction of threat to an acceptable level....................5
Part C...............................................................................................................................................6
Failure to act according with the public interest principle..........................................................6
References........................................................................................................................................7

PART A
Independence of the auditor
In the present case, the MRF partners have provided the traditional auditing services to the client.
Along with this, they also provided the consulting services. The company increased the fee
charged from the consulting services, which reflects more than 50% of the total income of
partners. It has been seen that, by providing consulting service the objectivity and the
independence of the auditor affected.
The requirement of objectivity is very essential at the time, when auditor is providing other
services along with audit. It is essential for exercising the professional judgment (Hossain et al.
2016). This has been supported by APES 110 Code of Ethics for Professional Accountants
issued by Accounting Professional & Ethical Standards Board Limited (APESB) (APESB,
2010). As per APES 110, Objectivity refers as presence of mind, which has measured all
consideration connected with the activity (APESB, 2010). In the given case, auditor provides
traditional audit services, but mainly they are engaged in the consulting services. By this, the
objectivity of the auditor at the time of expressing their opinion on the financial statement got
impacted. There are numbers of ways by which threats to objectivity arise (Roy, and Saha,
2016).
Auditor independence means, independence of the external auditor from the clients that may
have the financial interest in the company being audited (Johari, Mohd‐Sanusi, and Chong,
2017). Auditor independence required the integrity and objectivity approach. Generally the
auditing company provides the consultancy services to its client. It is permissible that auditor can