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The Role of Safeguards in Strengthening Independence - Term Paper Example
Author : fordschoen
Finance & Accounting
Pages 8 (2008 words)
The Role of Safeguards in Strengthening Independence Name of the Student Student’s ID University Date Table of Contents Safeguards to save the Independence of the Auditors 3 Conclusion 5 References 6 Introduction Financial auditing refers to the process of evaluating the financial information and determining whether they comply with the regulations and standards laid down for the public companies (Basu, 2010: 1.4; Kumar and Sharma, 2006: 2)…
Independent auditing is encouraged in organizations in order to protect the potential investors and shareholders from any mis-representation of the financial statement or fraudulent claims that are often made in the public companies (Gray and Manson, 2008: 98). Moreover, after the Sarbanes-Oxley Act (SOX) introduced in 2002, the appointment of independent auditor becomes mandatory for improving the auditing and accounting procedure. Many organizations are seen to appoint independent auditors, who are certified public accountants, responsible for checking their business transactions and financial records, yet not being affiliated with it (Singleton, T.W. and Singleton, A.J., 2010: 13). However, independent auditing is seen to suffer from a large number of threats such as, intimidation threat, trust or familiarity threat, advocacy threat, management threat, self-review threat and self-interest threat. Therefore, safeguarding the independence of the auditors becomes a major area of concern. This report focuses on the safeguards for the independence of auditors. Safeguards to save the Independence of the Auditors On recognizing the significant threat in dependence in the auditing process, the organization must decide on some safeguards in order to save the auditors. ...