M4 A1 Discussion

Peer 1

M4_A1

Eirenei Simanu posted Jun 4, 2018 9:56 AM

Auditor Independence

            Auditor independence refers to the independence of the internal auditor or of the external auditor from parties that may have a financial interest in the business being audited. Independence requires integrity and an objective approach to the audit process. The concept requires the auditor to carry out his or her work freely and in an objective manner.

· Independence of the internal auditor means independence from parties whose interests might be harmed by the results of an audit.

· Independence of the external auditor means independence from parties that have an interest in the results published in financial statements of an entity.

This issue rises from the perspective of third party. An auditor might not appear to be independent but he or she might be independent in fact. For a simple example, you are the auditor and audit your Family’s company. Even though you uphold independence in fact, you are not independent through third party’s perspective. Only being independent in fact but not being independent in appearance will case the damage of public confidence to audit results. Other causes such as the auditor providing other services for contingent fees, direct financial interest with the client or participating control or manage the client company are also the examples of breaking the independence in appearance rule.

In auditing, keeping an independent mental attitude involves "professional skepticism". While an auditor should not assume that everything management says is a lie, he also shouldn't assume that everything management tells him can be relied upon as true without any need for independent verification by the auditor. An auditor often deals with management, but his duty is not to the audited company's management, but rather to the directors, owners, and potential future owners of a company, who will rely on the audited financial statements to make decisions about investment in the audited company. auditing is a review process, usually of accounting procedures.

 

 

Reference:

From Wikipedia, the free encyclopedia (Auditor independence, December 2007), Retrieve from: https://en.wikipedia.org/wiki/Auditor_independence

Peer 2

View profile card for Joshua Doyle

Doyle_J_M4A1 discussion

Joshua Doyle posted Jun 4, 2018 9:08 PM

Auditor independence is an essential concept of accurate auditing. If there is any direct financial connection from the company being audited to the auditing entity there is potential for biased audit results. if a 3rd party, lets say a creditor is making decisions based on the audit status of the company to make a lending decision it would be highly unethical for the auditor to be paid by the company because he would not have an in biased opinion of the company thus his opinion is not valid. 

I am lucky enough to be a compliance auditor for the pharmacy chain i work for, unfortunately i am not at all independent, i am paid by and answer to the pharmacy division i work for rather than the compliance department i get my direction from, because of this the division has a lot of influence on how i do my job. for me to be truly independent i would need to be paid by the compliance department and not have to answer to the division.