Why Independent Matters

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Original Article

How and why an independent audit matters
Received (in revised form): 27th July 2010

Robert J. Kueppers
is deputy CEO of Deloitte LLP and has 35 years of professional experience. As deputy CEO, he works closely with the CEO of Deloitte LLP and is responsible for regulatory and public policy matters. Mr Kueppers also provides direction for quality, risk and legal affairs. He is also a vice-chairman of Deloitte LLP and serves major clients of the firm in an advisory capacity.

Kristen B. Sullivan
is a Deloitte LLP partner and works closely with the deputy CEO of Deloitte LLP, focusing on regulatory and public policy matters for the firm. In this capacity, she also engages with representatives from the other large public company auditing firms in advancing progress in areas of common interest and importance for the public company auditing profession.

ABSTRACT With each new fraud and ‘audit failure’ divulged in the financial press, more pointed questions are being asked about the value of the independent audit. Although many recognize that the audit profession plays an essential role in the functioning of the global capital markets and adds value to the roles played by other stakeholders in the financial reporting process, others contend that the value of the independent audit, and the measure of its relevance to investors, is measured only by the absence of fraud or failure of the business once the audit is complete. Discussions of audit quality tend to occur in the context of alleged audit failures, without recognition that the vast majority of audits stand the test of time. In answering the question ‘how and why an independent audit matters’, we have considered the explicit value of the final audit report and the importance of the consultative audit process. In addition, we have highlighted the fact that each of the principal players has a responsibility in the financial reporting and governance regime; that complementary interplay and responsibility to the investing public is essential to help promote investor confidence through reliable financial statement information. Financial reporting must continue to evolve to meet the needs of financial markets in the new world, whether that includes movement toward more real-time reporting with ever-changing technology or toward more principles-based standards. Independent auditors have and will continue to focus on improving performance, which is essential to effectively execute quality audits that contribute to the reliability of more timely and more useful financial information. In addition, it is essential that auditors continue to be positioned to provide assurance on financial reporting, in any format. As we move toward a set of global standards (accounting, auditing and independence), the value of the independent audit will continue to increase in influence as an element of efficiently functioning global capital markets affecting investors around the world. The views expressed in this article are those of the authors and do not necessarily reflect those of Deloitte LLP or any other organization with which they have been associated.

International Journal of Disclosure and Governance (2010) 7, 286–293. doi:10.1057/jdg.2010.22; published online 23 September 2010 Keywords: audit report; financial reporting; global standards; independent audit; investor confidence; professional skepticism Correspondence: Robert J. Kueppers 1633 Broadway, New York, NY 10019-6754, USA E-mail: rkueppers@deloitte.com

© 2010 Macmillan Publishers Ltd. 1741-3591 International Journal of Disclosure and Governance Vol. 7, 4, 286–293

www.palgrave-journals.com/jdg/

How and why an independent audit matters

INTRODUCTION
The US economy continues to evidence strength after a long upheaval; investment in US markets also continues to be strong. This reflects, in part, the longstanding, underlying confidence in US markets, which is enhanced through effective regulation, oversight and...
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