Friday, August 12, 2011

Why is Auditor Independence Important?


(1) Reliability of financial information
• Reliability of financial information is a key aspect of Corporate Governance.
• S/H and other stakeholders need a trustworthy record of directors’ stewardship to be able to take decision about company.
• Assurance provided by Auditors is a key quality control on the reliability of information.


(2) Credibility of financial information
• An unqualified report by independent external auditors on the account should give credibility and enhance the appeal of the company to investors.
• This unqualified report should represent the views of independent experts who are not motivated by personal interests to give a favourable opinion.


(3) Value for money of audit work
• A lack of independence seems to mean that important audit work may not be done, and thus shareholders are not receiving value for the audit fees.


(4) Threats to professional standards
• A lack of independence may lead to a failure to fulfill professional requirements to obtain enough evidence to form the basis of an audit opinion, in this case, to obtain details of a questionable material item.
• Failure by auditors to do this undermines the credibility of the accountancy profession and standards it enforces.



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3 comments:

  1. Hi admin,
    I read your blog, its really awesome,

    An introduction and overview of the growing field of forensic accounting. Gives a broad information base on what this new and exciting career choice has to offer.

    Brampton accountant


    Your regards
    Alfaj Ripon

    ReplyDelete
  2. Thank you for your blog. It helped me answered my final exam question. „^~^„

    ReplyDelete
  3. thx for this, it helps my group members to develops their ideas

    ReplyDelete