Auditor Independence And Financial Statements - 1768 Words

According to ICAEW, auditor independence mainly refers to the independence of the external auditor from parties that have an interest in the financial statements of the business being audited. It requires having both integrity and an objective manner to the auditing process. In order for the concept to be deemed effective the auditor needs to carry out their work freely. One of the main purposes of auditing is to increase credibility of the entity’s’ financial statements, as they have expressed their own professional opinion on the truth and fair view in accordance with the proper accounting standards used. This is only possible if the audit is made with reasonable assurance that it has come from an independent source and has not been influenced by other parties, such as managers, directors or by conflict of interest. Lindberg and Beck (2002) claim that auditor independence is hailed as the â€Å"cornerstone† in the accounting profession as it is the core reason as to why the public trusts their professional opinion. However, since 2000, many accounting fraud scandals have negatively impacted public opinion on the legitimacy of the audit profession and, if in fact, its independence is uninfluenced by other parties. One of the scandals being the sudden collapse of Enron, given that a few months prior its bankruptcy its auditors Arthur Andersen, which was one of the five largest audit and accounting firms, claimed that Enron was financially healthy, but in fact they were paid offShow MoreRelatedAuditor Independence On A Corporation s Financial Position And Its Financial Statements2388 Words   |  10 PagesIndependence Introduction Auditors provide comfort and assurance regarding a corporation’s financial position and its financial statements. The assurance field centers upon one common trait: trust. Trust is vital to an auditor because investors must feel confident that the financial statements accurately reflect the company’s financial standing. Auditor independence is the backbone behind the perceived trust and comfort an auditor provides while examining the financial statements. If an auditor impairsRead MoreImportance of External Auditors1110 Words   |  5 Pagesof this essay is to study the function of external auditors in order to analyze why it is important to be independent. The primary mission of external auditors is to review and evaluate all the financial records of a company or corporation. They provide an objective opinion on the organization’s financial statement and effectiveness of the accounting polices in order to help management to make decisions. If the independence o f the external auditors is impaired, the public will doubt the quality ofRead MoreAssessing The Internal Audit Function988 Words   |  4 Pagesaudit of intern controls with the audit of a firm’s financial statements (PCAOBUS, 2007). An auditor’s objectives of the internal controls audit and that of the financial statements are not identical, and the auditor must perform the audits to achieve both objectives. Internal Audit Objectivity Auditors of a firm’s financial statements, be they external or internal auditors, have the primary objective of providing users of said financial statements with an opinion on the fairness of reported informationRead MoreThe Benefits of Independent Finanical Audit Stakeholders1795 Words   |  7 Pagesare the benefits of an independent financial statement audit stakeholders? To understand and answer that question, the word audit has to be defined. Based on the IRS, an audit is a review or examination of an organization or individuals accounts and financial information to ensure information is being reported correctly to verify the amount of tax reported is accurate. From Wikipedia, the audit of financial statements is the verification of the financial statements of a legal entity, with a view toRead MoreIndependence of External Auditor1203 Words   |  5 PagesIndependence of external auditor By:- shubham kanchhal Auditor independence  refers to the independence  of the auditor  from parties that may have a financial interest in business being audited. Independence requires integrity  and an objective approach  for the audit process. This concept requires the auditor  to carry his work freely and in an objective manner. The purpose of an audit to enhance the credibilityRead MoreRecommendations For Reducing The Risk Of Audit Failure966 Words   |  4 Pagesintegrity. In all the cases of financial statement fraud, it was a result of upper management overriding controls and falsifying the numbers to enhance the financial standing of the company. Audit failure occurs when there is a material misstatement of the financial statements that is not reflected in the audit report, and the auditor has made a serious error in their opinion of the accuracy of the financial statements. The risk of audit failure is minimized when the auditor has followed Generally AcceptedRead Moreauditing Essay1046 Words   |  5 PagesReda Worked With: Ibtihal Slassi Fall 2013 1- Auditor independence refers to the disinterest from the internal and external parties that could influence the professional judgment of an auditor. In other words, auditor independence is the lack of any interest that may create a threat or a risk of material bias regarding the reliability of the financial statement. Furthermore, the main aim of auditor independence is to improve the consistency and the reliability of information thatRead MoreCase1.1 Enron Corp843 Words   |  4 Pagesthe Sarbanes-Oxley Act earlier. They should be considered the non-auditing services for auditing clients is a serious issue earlier. †¢ The auditors of the Andersen firm. They didn’t do their responsibility and didn’t follow professional standard rule. †¢ The high level of managers of the Andersen firm because they didn’t train their auditors well. They may ignore some important ethical principles and only pay attention how to make their revenues. Question 2, Three types of consultingRead MoreThe Importance Of Auditor Independence On An Audit1473 Words   |  6 Pages Why is it important for external auditors to be independent? Relate your answer to the primary role of external auditors. Give examples of specific ways the lack of auditor independence may impact adversely on an audit. Auditing is one of the most essential processes that has to be executed in the business world. It involves independent testing on the documents of a business to establish the financial statements are prepared without any material misstatements and maintained as the law requiresRead MoreA Report On Auditor Independence1363 Words   |  6 PagesAudit Independence Assessment Item 02 –Q1 Author- I U Amarasiriwardhana Abstract This report discusses importance of auditor independence nowadays and how statutory, regulatory code of ethics has been involved in enhancing it and how non-audit services impair the independence of auditors. Table of contents 1.0 Introduction 2.0 Why Independence Important for auditors 3.0 How enhanced auditors independence 4.0 Non-audit services provided by the auditor to their audit client. 5.0 What are the arrangements