Evaluation Of A Independent Audit Committee

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Because the audit committee is representing the shareholders, and assist the external auditors to reduce the information asymmetry, as the agent for the shareholders towards management (agency principal). By hiring the audit committee and the external auditor, it will monitor the managements as shareholders agents, in order to minimise or to reduce the risk of management actions that harm shareholders interests.
Furthermore, the ASX (ASIC 2015) stated that it is important to be independent, due to it affects the audit committee abilities to exercise independent judgement as the crucial factor in company management, operations, and decision making. Independent audit committee will promote and support higher audit quality, both internally
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This provision was made due to they considered these non external audit task could improve the reliability of financial reporting process and its result, eg IT and system consulting.

g. The non audit service, can disturb the auditor independence, in the form of self interest threat, eg consulting system, IT, bookkeeping service, taxation, etc.
Partners then should be rotated every 5 years, and some services outside audit should not affect the auditors testing on the clients financial statements, eg taxations, IT system internal controls. But for some management consulting like market research, merger acquisition, etc which won’t affect the financial statements, then they will not harm the auditors independence.

Also based Andersen (cited in Beattie, Fearnley 2015), the Independent Oversight Board (IOB) set up by Andersen in the US, after the Enron problems emerged but before the firm collapsed, recommended that some consulting services provided by the firm should be separated into partnerships managed independently from audit partners and without financial interdependence.

II. Defined as: ‘the gap between society’s expectations of auditors and auditors’ performance as perceived by society.
Three components:
• The reasonableness gap as a gap between what society expects auditors to achieve and what they can
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