Auditor Independence Essay

Auditor competence is related to the experience and education in the field of auditing (Power and Terziovski, 2007). Also is personal attributes of the auditor which enables to achieve superior performance (Lasmahadi, 2002). To achieve the competence first should begin with formal education which further explore through experience of audit work. The auditor should take the technical training which is cover the general education and technical aspects (Samagaio and Rodrigues, 2016). And the junior auditor can achieve their competence by gain their professional experience through the audit work and review the work of the senior auditors. Competence is a sufficient skill which can be used to perform an audit objectively (Lee & Stone, 1995) and measured with four formative indicators: (1) planning, (2) knowledge, (3) experience, (4) supervision. (1) Planning: a good audit planning will make auditor possibly have competence to

1- Independence: - The internal auditor should have the independence in terms of organizational status and personal objectivity which permits the proper performance of his duties.

Independent audit in turn makes the financial statements more credible and reliable source of information

This title consists of 9 sections that instruct in the behavior of auditing firms and establish guidelines for external auditor independence. It also sets restrictions for clients outside of auditing boundaries and requirements for audit partner rotation.

The last aspect, programming independence, covers the need of the auditor to have absolutely no interference from their audit client in how the audit is run. An audit client cannot attempt to control any aspects of the audit such as changing or restricting any procedures an auditor may want to perform. The audit client may not try to control any of the audit work and may not put any type of restrictions on how many auditors may come to the location to perform fieldwork.

Q1 There are three different levels of services you could obtain from a certified public accountant. These are referred to as compilation, review, and audit. There are significant differences between the objectives of an audit of financial statements in accordance with generally accepted auditing standards and the objectives of a review in accordance with statements on standards for accounting and review services. The objective of an audit is to provide a reasonable basis for expressing an opinion regarding the financial statements taken as a whole. A review does not provide a basis for the expression of such an opinion because a review does not contemplate obtaining an understanding of the internal control

Places limitations on the provision non-audit services by a firm responsible for auditing the company in order to strengthen and enhance auditor independence

With the stock market developing and recent market crash, investors require auditors expose whether the company’s financial statements is correctness and represented the reality economy situation about the company more important than some small embezzlement in the company (Van Peursem & Pratt, 2006). The investors will make money when their shares’ indexes that will be influenced by whether the company has powerful and profitable situation in the current and future increase at stock exchange, so many investors want to research and collect auditors’ reporting for relative company to help them to choose a good companies’ stock. Therefore, if the information auditors exposed is incorrect and false, it will make many investors lose money, like the Enron or WorldCom scandal. On this occasion, auditors have responsibility to alert public investors when they discover some financial risk in the company. However, some financial risk will has not any negative effects of the company and hard to discover, which will put auditors into a very ambiguous position. Nonetheless, according the code of ethic, the competence requires auditors should have professional skill to discover that financial risk, and professional

In order to test and receive a more precise connection between the corporate governance and audit fees, to explore the authentic relations between the independent of directors and external fees is necessarily. Therefore, the first hypothesis would be:

The independent auditor cannot be an employee of the company, as this will bring his/her opinion into question. The independent is appointed by the AGM by the shareholders with in Spur and not the directors or managers.

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

According to Kieso, Weygandt, and Warfield (2013), “an auditor is an accounting professional who conducts an independent examination of a company’s accounting data” (p. 1508). In other words, auditors are independent agents that ensure the accuracy of financial statements. Although internal and external auditors play different roles with an organization, they must follow auditing standards and procedures to detect fraud.

2001. It was the year that every individual; man, woman and children on Earth would remember. There was the September 11 event which was considered the worst terrorist attack that has happened in U.S. history, killing a total of 2, 977 people. And not long after that, in the business world, on December 2, the greatest corporate failure was exposed. The 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

The case of Enron Corporation and Andersen, LLP can be noted as one of the most infamous fraud scandals in US history. Investors lost millions of dollars and ruined the public’s trust. Enron was once the seventh largest public company in the United States and Andersen LLP was the world’s largest and most respected business organizations. Enron’s stock prices soared to approximately $100 to less than $10 in 2001. How did these two big giants fall into oblivion and what could have been done to avoid the disaster of these companies?

The lack of independence for external auditors will lead to the neglect of auditing risks (William R.K., 2003), which are the main reasons for the failure of certified accountants and professional accounting organizations. The consequence of the external auditors deprived of independence would be very serious. And there are many cases, which aroused by the failure of external auditors and most are related to the lack of independence. One famous example is the bankruptcy of Enron and the role played by its external auditor, Arthur Andersen (Todd, S., 2003). Arthur Andersen was once one of the biggest accounting companies in the world, and was canceled for the involvement in the Enron bankruptcy scandal.