Role of the External Auditor in Corporate Governance

2653 WordsMar 6, 200611 Pages
The Role of the External Auditor in Corporate Governance The external auditor has long played an important role in the corporate governance function. However, before we begin our analysis on how the external auditor plays this role and its importance, we must first examine the responsibilities and duties of such an auditor. Similarly, we need to clearly define what corporate governance is before we discuss in detail the role that auditors play in it. 1. Introduction 1.1 The External Auditor External auditors are employees of a public accounting firm which has been engaged to conduct the audit of a particular company's financial statements (audit client). The external auditor's responsibility is to provide assurance to the general…show more content…
For many countries, this meant regulations need to be changed to become stricter, leading to Singapore coming up with the new auditor independence requirements. 3. The New Auditor Independence Rules The change was brought about by the recommendations of the Disclosure and Accounting Standards Committee (DASC), established in December, 1999. The new rules were much more numerous and more wide-ranging. They were based on the Code, as well as auditor independence rules of professional bodies and other regulatory agencies in Australia, the UK, and the US. To ensure that these requirements are kept up to date and complied with, the Auditor Independence Committee (AIC) was set up in December 2001. The AIC was responsible to oversee that the DASC was coherent with the international practices. Developments in this area will be watched by the AIC and applied to the local framework. The fourth schedule focus on principles that relate to the five sources of threats to the auditor's independence: self interest, self review, familiarity, advocacy, and intimidation. It also states out specific requirements and definitions of the different types of relationships that the auditing firm and client must have. The relationships that are stated out can be divided into 3 categories, namely, financial, personal and business. Financial relationships
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