WHY IS AUDITOR INDEPENDENCE SO IMPORTANT?
Auditing is the efficient critical examination done by one person or group of people’s independent from the system audited. To do an audit, confirmed information must be present and some standards by which the auditor can evaluate the information. Another is gathering and evaluating any information to determine whether the information being audited is identified in accordance with establish criteria to satisfy the purpose of the audit and also auditors must be competent to identify the types and amount of evidence to accumulate to reach the correct conclusion after the evidence has been examined and finally the preparation of the audit report, which is the communication of the auditor’s findings to user. Auditor independence is the main aspect affecting audit quality. Public accountants or accounting firms that perform audits of commercial and non-commercial financial entities are called independent auditors and has duties to use a reasonable care and skill, be independent of the company, statutory duties to report to members and to ASIC and lastly to comply with auditing standards and other professional standards. A contractual relationship happens when an auditor accepts an offer with the company and an engagement letter is signed by the auditor and client. The auditor maintains professional relationship with Management, board of directors and audit committee, internal auditors and stockholders in financial statement audit. Independence is one of the auditor’s most vital characteristics and it is often said that it is important to the reliability of auditors’ reports. It is also the basic requirement for an audit although absolute independence is impossible, auditors strive to maintain a high level of independence to keep the confidence of users relying on their reports. Those reports would not be credible, and investors and creditors would have little confidence in them, if auditors were not independent with the two...
References: * Arens, et al, (2010) Auditing, assurance services and ethics in Australia: an integrated approach, 8th edition, Pearson
* Johnson, Rod 2004
* FRC Report: The Ken Spencer Memorial Lecture, 2010 presented by Mr Tim Flynn
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