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Auditing and Accounting Ethics - Essay Example
Author : labadieadolph
Pages 17 (4267 words)
It is often argued that the "economic incentives associated with different levels of auditor independence threats and litigation risk influence auditors' evaluation of information and their subsequent reporting choices". (Blay)
The most important quality an auditor posses is the independent and unbiased approach…
The act suggests undertaking continuous rotation of audit partners. It also emphasises increased financial reporting and imposes limits on certain non-audit services.
The Sarbanes-Oxley act suggests reducing the economic interdependence of auditor and client. The economic rent provided to the auditors can only be gained as a result of long lasting relation ship between the auditor and the client, this condition in turn acts as a hindrance in the way of auditor to act independently. The threat of lawsuits often act as a motivator for the auditors to act independently as inefficient or unfair performance can result in shape of judicial action against auditors.
In most of the studies undertaken it has been observed that the higher degree of threat to the auditors independence leads to authentic opinion. Its also found that auditor does not tend to change their decision with the varying degree of independence but change the decision process.
i) Difference in the social and cultural values: Standard setting is a crucial process, which includes change. Some societies have open and flexible culture, which keeps on transforming with the time. But on the other hand closed societies have relatively rigid culture. The acceptance level of change in these societies is very low. ...