Auditing Report: Concepts of Independence, Objectivity, and FRC Role

This report provides a comprehensive overview of auditing, focusing on the crucial concepts of independence and objectivity within the context of the external audit process. It defines these concepts and highlights their importance in ensuring unbiased and credible financial reporting. The report then delves into the professional guidelines designed to uphold auditor independence and objectivity, including ethical provisions and principles. Furthermore, it evaluates the level of external auditor independence and examines the role of the Financial Reporting Council (FRC) in the UK, providing arguments both for and against the FRC's involvement. The report concludes by summarizing the key findings and emphasizing the significance of these concepts in maintaining the integrity of the auditing profession and the reliability of financial information.

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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Objectivity
Auditing objectivity means unbiased attitude of auditor towards its work that means not be
favourable with one party. Objectivity take the auditor to have balance with both the party.
Objectivity is important for the external auditor as he have to make balance between both the
party like directors of the company and the shareholders and investors of the company.
Objectivity include service approach as an auditor must have qualification for the work and he
must have independence to do that work.
Professional guidelines to make sure the independence and objectivity of auditors.
Supporting Ethical Provisions
A1.1 The senior management team and those directly responsible for managing of the
audit and other public interest security operation of the business shall provide the required
details. Community and conduct in the corporation and the organization, respectively, to ensure
that perhaps the ethical results of the enterprise are followed. The overarching values and legal
provisions that support them are fundamental and outweigh all the company's financial
objectives.
A1.2 The company shall develop and enforce secret policies and procedures for whistleblowing
in the company that provide for confidential leaking information. Without fear, associates and
workers report questions about the company's dedication to quality practice and job judgement
and values.
Independence Overarching Principle
A2.1 In regards to any undertaking, the undertaking and each covered person shall guarantee (in
the case of the regulatory standards, to the degree that they are in a position to do so) that the
undertaking and each covered person are exempt from constraints and associations that make it
possible for an impartial, rational and knowledgeable third party to infer that the undertaking is
autonomous or for any covered person to be affected (Kend and Basioudis, 2018).
Supporting Ethical Provisions
The firm and each of the individuals protected shall ensure (in the case at hand) that they are
covered (A protected person, to the degree that they are able to do so) that the company's
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independence and each protected person are not compromised in relation to each of the
institutions applicable to the
Involvement- This involves ensuring that the organization and each person covered is not
included in decision-making by management. The timeframe during which freedom is not
affected is as follows:
In the event of an audit, for the time covered, at least, The financial accounts to be evaluated and
the remainder of any Subsequent time before completion of the audit.
In the situation of any other interest of the public guarantee undertaking, at least for any time
during which the source material is assessed or analysed in accordance with the undertaking, or
for any future period before the undertaking has been accomplished.
A2.2 The company and each protected person shall ensure (in the case of the covered person, to
the degree that they are in a position to do so) that the freedom of the undertaking and of each
covered person is not jeopardized in relation to each individual applicable to the undertaking.
This means ensuring that the business is protected and each covered. In management decision-
making, the employee is not involved. The timeframe during which freedom is not affected is as
follows:
(a) In the cases of an investigation, the audit shall be carried out at least all throughout period
reported in the financial reports to be audited all through any other period.
(b) In the case of an additional public interest pledge, Commitment, at least for any period during
which, whether from the time when, the subject matter is calculated or determined in accordance
with the interaction, and for any corresponding period before the conclusion of the interaction.
Evaluation of both level of external auditor independence and role of financial reporting councils
in UK
Reality of auditor independence
Audit independence is important such that the views of the accountant are always impartial,
unbiased, therefore independent of any harmful pressure or/and potential conflicts of interest that
overcome the best expertise of finance and banking (Sabillon, Serra-Ruiz, Cavaller and Cano,
2017).
Investment Advisory Services: it is unjustifiable for a corporation to supply an
investigation customer with brokerage, investment advisory, or corporate finance services. It
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cannot act as an unlicensed financial adviser, agent, insurer, make investments for an audited
entity, or even have unilateral control and over assets of an audited entity.
Bookkeeping: If an accountant company supplied an audit customer with accounting needs,
it could subsequently be put in the role of reviewing its research and thus would lack freedom.
As a consequence, all record keeping activities are forbidden from being provided by a service
provider, such as preserving accounting documents, filing income reports, or processing source
information.
Auditor arguments for the role of FRC.
As the last updates were produced in 2016, there have already been successful improvements as
well as the FRC would expect that the latest collection of improvements will maintain this
pattern. After 2016, the company's premium revenue from non-audit services rendered by
auditing agencies has declined by 8%. "No independent consultant has lobbied the FRC to lift
the payment cap towards non-audit products over the last 3 years, and the regulatory believes
that: "board members no longer deem their auditors to be the preferred supplier for non-audit
transactions for even the most portion. In the expectation that it will be clearer to use, this new
round of updates has also streamlined the Ethical Standard, while the updated one. Additional
implementation guidelines to make it easier for accountants about how they can react to
specifications is included in the International Standards on auditing.
Auditor arguments Against the role of FRC.
The FRC expects that all these changes will reduce the possibility of detrimental improprieties
among accountants and consumers, in which an examiner's business interests are perceived to
become the most critical aspect inside an audit partnership, as compared to an audit's efficiency
emphasis. The regulatory also said amendments was the outcome of "a thorough post-
implementation study, connected by four public hearings and intensive dissemination." They
noted that perhaps the results will still be reviewed and discussed whether certain more
improvements can be made after its guidelines are enforced. Both kinds of situations which are
the responsibilities of strategy can be characterized, but they generally include guiding and
guiding the organization, including making critical risks and evaluate judgments on the
procurement, coordination and monitoring of human, economic, material and virtual capital
(Maso, Lobo, Mazzi and Paugam, 2020). The Insolvency Service contributes to the examination
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of businesses and persons joining a bankruptcy proceeding and the examination of the operations
of a corporation when its actions are accused of being carried out.
CONCLUSION
In last it is concluded that audit is the review or evaluation by an inspector of multiple
accounting records characterized by physical stock inspection to ensure that all agencies adopt a
recorded making decisions procedure. It is done to assess the authenticity of financial statements
supplied by the firm.
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REFERENCES
Books and Journals
Barr-Pulliam, D., Brown-Liburd, H. L. and Sanderson, K. A., 2020. The effects of the internal
control opinion and use of audit data analytics on perceptions of audit quality,
assurance, and auditor negligence. Assurance, and Auditor Negligence (February 7,
2020).
Kend, M. and Basioudis, I., 2018. Reforms to the Market for Audit and Assurance Services in
the Period after the Global Financial Crisis: Evidence from the UK. Australian
Accounting Review, 28(4), pp.589-597.
Sabillon, R., Serra-Ruiz, J., Cavaller, V. and Cano, J., 2017, November. A comprehensive
cybersecurity audit model to improve cybersecurity assurance: The cybersecurity audit
model (CSAM). In 2017 International Conference on Information Systems and
Computer Science (INCISCOS) (pp. 253-259). IEEE.
Maso, L. D., Lobo, G. J., Mazzi, F. and Paugam, L., 2020. Implications of the Joint Provision of
CSR Assurance and Financial Audit for Auditors' Assessment of Going‐Concern
Risk. Contemporary Accounting Research, 37(2), pp.1248-1289.
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