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The Role of Safeguards in Strengthening Independence
Finance & Accounting
Pages 4 (1004 words)
THE ROLE OF SAFEGUARDS IN STRENGTHENING INDEPEDENCE Report Title THE ROLE OF SAFEGUARDS IN STRENGTHENING INDEPEDENCE Name: Fatma Hamad Almurakhi Student ID Number: 201001428 Due Date : 22-12-2013 The Role of Safeguards in Strengthening Indepedence Introduction The independence of the auditing body in the business environment is of paramount significance to the smooth running of financial operations.
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 intimidation threats. In this light, designing and deploying effective safeguards will increase the level of auditor independence to and ensure integrity in their work. This can be achieved through the mandatory auditor rotation, peer review, independent auditor appointing, free setting and formulation of effective audit committees. Mandatory Auditor Rotation Mandatory auditor rotation is the act of compelling all financial organizations to adopt and engage a different auditor each financial year to avoid the preference of a single auditor. Often, the management prefers to hire the same auditors every year to ensure that they are able to manipulate them to provide audit results that conform to the will of the management (Chung 2004, p. 8). This inclination of the audit results to the management's opinion undermines independence and reduces the integrity of the end results. ...
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