Auditing and why independence is important Essay

Auditing and why independence is important - Essay ExampleCarey, P. & Simnett, R. (2001) state that in auditing theory and practice, independence is a matter of intellectual honesty. Auditors are expected to be unbiased and impartial with respect to financial statements and other breeding they audit. They are expected to be fair to both the companies and executives who issue financial information and to the outside persons who use it. Independence is important enough to stand simply as a concept. The public will grant social recognition of professional status to auditors only so long as they are perceive to be independent.The nonion of individual independence is more specific in the conduct of each audit engagements. In essence, an individual auditor must not subordinate his or her judgment to others and must stay away from influences that might bias judgment.3Loebbecke, A. (2000) argued that actual threats have to be considered on the situations that might be perceived as threa ts by a reasonable and informed observer. Where such threats exist, the auditor must put in place safeguards that eliminate them or reduce them to distinctly insignificant levels. Safeguards apply at three levels safeguards in the work environment, safeguards that increase the risk of detection, and specific safeguards to serve up with particular cases. If he is unable to implement richly adequate safeguards, the auditor must not carry out the work. Gupta, K., (2006) mentioned that ethical guidance based on this framework includes examples of threats that might arise and appropriate safeguards to deal with them. But these are illustrative and not comprehensive. The auditor must be able to demonstrate that, in the particular circumstances under consideration, the fundamental principles had in fact been observed - a far more rigorous test of compliance.The framework approach is considered the most appropriate to adopt asThe aim of sizeable guidance should be proactive, i.e. to req uire the auditor to identify and address risks, not merely passively obeying the letter of the code. A set of principles supported by conclude guidance avoids the argument that any course of conduct that is not specific wholey prohibited is permissible, encouraging a search for ways around the rules. The approach recognizes the naive realism that the auditor is not wholly independent of his client, but that the threats to independence must be managed to clearly insignificant levels. Although the basic principles of auditor independence are innocent they may need to be applied to an almost infinite number of circumstances. The detailed rules-based approach will have to be incomprehensibly complex to cope with all possible circumstances, or will be a blunt instrument, sometimes imposing inappropriate solutions or completely missing the problem. The business environment and social structure of audit firms and their clients are continually evolving particularly in an international c ontext. Clients and shareholders are generally allowed to choose the auditors to perform other work if they believe it is most high-octane for them to do so, where adequate safeguards can be put in place. Nonetheless, where adequate s