The Impact Of External Auditors On The Financial Position Of The Company

1422 Words Feb 3rd, 2016 6 Pages
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 Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), which reflects a true and fair view of the financial position of the company. Deloitte, Ernst & Young, PWC, KPMG are examples of the thousands of accounting firm, most commonly referred to as ‘The Big 4”. They are the world’s largest and most outstanding audit service company.
However, in 2013, the credibility of “The Big 4” is questioned by the Competition Commission as they were accused of providing low quality of audits but with higher prices due to the lack of independence from the executive management (Moulds and Feeney, 2013).
Independence can be defined as the auditor is free from any conflict of interests with company and to ensure the integrity of the auditing process. Thus, independence implies the ability and willingness of the auditor to identify a range of deficiencies, including the accounting policies adopted, and absent or misleading report during the audit process. Also, to…
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