INTRODUCTION External auditors are accountants who work independently of a particular company employed by a firm to inspect their financial statements by analysing the performance of the company and presenting an audit’s report. They plays an important role to enhance the user’s confidence, including shareholder and creditor with an expert, independent opinion whether the annual records of the company are prepared according to accounting standards of the entity, such as Generally Accepted
Introduction: Auditors, accountants, and companies must comply with the regulations as recommended by the International Financial Reporting Standards (IFRS). Disputes concerning convergence issues and compliance may arise between companies and the auditors. In the case of dispute, the companies and the auditor should consider alternative dispute resolving mechanisms which are faster, less expensive and less adversarial than traditional litigation. Reason for Conflict: Audited financial statements
Independence is a very important element in auditing. Because of the Enron Corporation and other scandals, independence of auditors becomes a vital issue in the audit industry. It is difficult to achieve ‘independent’ for auditors as there is the fact that the client pays the audit fee. In this essay, we will focus on the independence of internal audit. Internal audit plays an important role in a company. According to the IIA (1999), “Internal auditing is an independent, objective assurance and
crash of Enron in US, followed by the worldwide collapse of its auditor, Arthur Andersen became one the most popular accounting scandal where it is still being talked about even after a decade has passed. Following this scandal, other massive organizations like WorldCom (2002), AIG (2004), and Satyam Computer Services (2009) shared the same fate. Since then, there have been questions being asked on the issue of the independence of auditors being one of the major contributors to these accounting scandals
the external auditor is to protect the interest of the public. To achieve this, it is important for the public to trust and have confidence in the work of an auditor. It is crucial that auditors appear independent to the public in both fact and appearance. For this reason, it is the auditor’s responsibility to ensure that there are no personal or business relationships with anyone in a position of influence within the firm they are auditing. Even though the personality of the auditor might allow him
Enron nonaudit services as well as audit services, meaning that AA could advise the structuring of transactions for desired disclosure outcomes and other work and later give an audit opinion on these transactions. This resulted in a blatant conflict of interest issue that many audit professionals did not recognize. Secondly, the “tone at the top” of AA did not encourage ethics or quality of work. Joe Berardino, CEO, made it clear that success was tantamount with revenue. He was noted by one former
promoting good corporate governance. The role of auditors has been emphasized after the pass of the Sarbanes-Oxley Act as a response to the accounting scandal of Enron. Even though auditors are hired and paid by the company, their role is not to represent or act in favor of the company, but to watch and investigate the company’s financials to protect the public from any material misstatements that can affect their decisions. As part of this role, the auditors assess the level of the company’s adherence
subjects of further review to understand that an auditor might encounter ethical dilemmas, if independence and objectivity are not part of the audit process. An auditor should keep objectivity at all times. Maire Loughran, a Certified Public Accountant and University Professor, explains “objectivity means the ability to look at facts the client presents, and reviews them with no preconceived notions or prejudices” (52). In other words an auditor has to exercise his ability to review information
is it important for external auditor to be independent? Throughout the years, banks, shareholders, possible investors and creditors always relied on the financial statements produced by a company. Since the management of a company is producing these documents it has been assumed that the managers may act dishonestly so that their performance looks better. To monitor the company’s performance better the directors along with the shareholders employ external auditors to check all these financial
Independence 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 credibility