In corporate governance, independence is therefore important in a number of contexts. Based on previous literature, the auditor’s independence can be affected by several factors. Using these links will ensure access to this page indefinitely. ROLE OF AUDITOR The role of auditors should be a key to attest the quality of financial performance of an organisation, in terms of reducing the risks of misstatements and to ensure that the financial statements are compiled according to current laws and regulations. Copy URL. In conclusion, auditor independence remains an important element when individuals are conducting an audit. the external auditor is an issue currently attracting scholarly scrunity. We can custom-write anything as well! Mautz and Sharaf (1961) in Arnold et al. In light of the growing importance of internal audit functions (IAF) and the limited archival evidence on internal audit quality, we examine an interactive model of IAF quality (comprised of competence and independence) to better understand the determinants of IAF effectiveness as a financial reporting monitor. independence of the external auditor. Abstract. Actual independence is quite straightforward for an accountant who is across the requirements. Internal auditors’ independence and objectivity is an important factor to enable coordination and cooperation between SAIs and internal auditors (INTOSAI GOV 9150), including in determining whether and to what extent SAIs can use the work of internal auditors (ISSAI 1610, ISA 610/par. Journal of Accounting and Economics 3 (1981) client in conducting the audit, analyzing the results, and 183-199. •To explain how various kinds of conflict and risk can affect the independence of the auditor. state of mind while independence is the state of affairs that permits an internal auditor to operate with an objective attitude. •To understand the difference between practitioner and profession independence. The auditor independence is measured by how honest an auditor... | … 9). Given the importance of his role, it is essential to explain the main concepts around the term auditing and subsequently focus on the concept of the auditor’s independence. In this perspective, it is not important to ask what an honest and honest auditor is. 25 Pages Posted: 22 May … Yet despite general guidelines, … 1981.AUDITOR SIZE AND AUDIT mental attitude objectively and impartially in the interests of the QUALITY. Independence requires integrity and an objective approach to the audit process. Achieving quality financial reporting depends on the role that the external audit plays in supporting the quality of financial reporting of quoted companies. •To define auditor independence. Generally, external auditors are statutory auditors out of love for compliance with the regulations and in public sectors, hired by the public accounting bodies. The concept requires the auditor to carry out his or her work freely and in an objective manner. It is critical for an auditor to be independent of the firms they audit due to many reasons. It will also support the claim that auditor independence is indeed central to the auditor… Auditor independence ensures an unbiased perspective and allows financial statements to be more reliable. TL;DR (Too Long; Didn't Read) The primary advantage of external audits is that they are more impartial than internal audits. Auditor independence —meaning independence of both the firm engaged to perform external audits and the individual auditors who conduct the audits–is a central facet of external auditing. AUDITOR INDEPENDENCE Business Alliances • Rule 2-01 (b) of Regulation S-X (17 CFR 210.2-01. Copy DOI. Internal and external audits are a fraud prevention measure. Auditor Independence Auditors provide independent third-party opinion on the financial statements of a company. Importance of an External Audit. Firms face the risk of damaging their reputation once auditors fail to report mistakes in their audits. If auditors do not remain independent, they will be less likely to report irregularities, thereby impairing audit quality. North-Holland Publishing Company attestation in the audit report. Even though the regulator and external auditor perform similar functions, namely the verification of financial statements, they serve particular interests. The most important applicable laws and regulation are: • Audit Firms Supervision Act (Wet toezicht accountantsorganisaties, (Wta)), (30-12-2009, stb. It is … (1999) noted that, auditors must be constantly aware of factors that affect the audit environment which can influence or harm their independence in other to ensure confidence of investors. Open PDF in Browser. The reliability and validity of an opinion rely on the independence of the auditor. Independence of external auditors. Audit quality is one of the most important issues in audit practice today. Add Paper to My Library. A company that institutes strong internal controls and conducts both random and regular audits sends an important message to employees. The independence of the auditor is the auditor's ability to maintain [10] Linda E. DeAngelo. Published in the 2006 Conference Proceedings of the IBFR Conference, Costa Rica and Elsevier Journals. 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