Why Is It Important for External Auditors to Be Independent? Essay

1446 WordsNov 26, 20126 Pages
Why is it important for external auditors to be independent? Relate your answer to the primary role of external auditors? By Zachariah Godfrey-Plews This essay has asked me to look at the importance of external auditors and why it is vital for them to remain independent. I will try and look at the many ways of the advantages of independent auditing from different perspectives for example the company itself, the general public and the state. I think it is important to first define what an audit and an external auditor to be able to answer this question effectively. Firstly an audit is (1)“an accounting procedure under which the financial records of a company or individual are closely inspected to make sure that they are accurate.” An…show more content…
A independent review from an auditor of the companies accounts will have many benefits to the owner for example for example he/she will be satisfied of the workings of that particular department. This will mean that the owner will have confidence of where they should place their funds or research and development if they know for sure that there department’s financial record are in order. This will then allow for the best method to allocate resources allowing for greater efficiency and overall the company to be profitable in the future. Also allowing for the report to be independent the report of the auditor will be true and fair in all respects. An independent auditor will also help keep staff of that company in check because of the fear that in the near future the accounts are to be examined and action would be taken against them if any irregular actions have been caused to happen. Thus the independent audit prevents this from starting in the first place and helps keep the staff in a moral check. A report by an independent auditor can also help in the process of borrowing money. As the report will have been done by an independent auditor it then becomes very easy for example a bank to trust this and therefore becomes very easy for them to issue a loan without time or delay. Also it may enable the firm to achieve a better rate than otherwise expected because they may be seen as a less risky investment. This can obviously
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