The Role of Safeguards in Strengthening Independence

The Role of Safeguards in Strengthening Independence Term Paper example
Undergraduate
Term Paper
Finance & Accounting
Pages 8 (2008 words)
Download 0
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)…

Introduction

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. ...
Download paper
Not exactly what you need?

Related papers

Sarbanes Oxley Act and Independence Responsibility View
The scandals not only adversely affected the share price but also the general public lost trust on the securities market. Hence the Sarbanes Oxley Act was formed to increase the accountability of the public company so that in future such type of scandals can be avoided. …
Provision of Non Audit Services by the Auditor to the Audit Client Is a Threat to Auditors' Independence
Introduction The value of an audited financial statement depends on the auditor’s independence. Accounting scandals such as Enron of the United States as well as HIH Insurance of Australia have created doubts regarding auditor’s independence and the value of their audit. The familiarity that is developed from the long audit tenure and the economic dependence arising from the non audit services…
envalue the Auditor Independence Provisions
The audit firms generally try to maintain a quality control system in order to safeguard the independence of the auditors. For achieving this objective, EC Recommendation (ECR), Statutory Audit Directive (SAD), which is also collectively regarded as European Union (EU) provision, and IESBA Code offer guidance and requirements for audit firms and statutory auditors, so that they can follow those…
Central bank independence and economic performance
In order to achieve economic growth in a country, formation of capital is essential for fresh investments in the economy. Increase in aggregate demand in the country is an important factor in this regard for attracting investment of capital in new projects. Liquidity in the system as well as interest rates should be monitored and regulated on a continuous basis by the central bank to provide good…
The Role of Safeguards in Strengthening Independence
However as the client is paying the auditors, thus the sheer freedom of the auditors cannot be absolute. The importance of autonomy of auditors and the inherent risk of not being totally self-determining raises many of the issues where safeguards where suggested in order to minimize the threat to the sovereignty of the auditors. Although auditors cannot be completely liberated from the client…
The Role of Safeguards in Strengthening Independence
Self-review threats also present threats to independence while advocacy threats may present unbiased opinions on the financial position of the firm. Intimidation threats such as coercion the owners of the firm will hinder the independence of the auditor. Auditor’s independence must be about integrity, objectivity and skepticism (Basu, 2009). The auditor is expected to monitor the integrity of…
The Role of Safeguards in Strengthening Independence
While this is so, manipulation of the auditing bodies is completely inevitable as these bodies are appointed and paid by the client. However, it is possible to optimize independence by neutralizing the threats that put independence at stake. Some threats that affect independence include self interest threats, self review threat, management threats, advocacy threats, familiarity threats and…