The value of auditing depends heavily on the public's perception of the independence of auditors. It is not surprising that independence is the first subject addressed in the rules of conduct. Whether independence is impaired depends on the nature of the threat, the specific safeguards applied to reduce or eliminate the threat.
Loebbecke, A., (2000) mentioned that a self-review threat occurs when any product or judgment of a previous assurance engagement or non-assurance engagement needs to be re-evaluated in reaching conclusions on the assurance engagement. When a member or member of the assurance team was previously a director or officer of the assurance client or was an employee would be in a position to exert direct and significant influence over the subject matter of an assurance engagement. Examples of circumstances that may create this threat include, but are not limited to: a member or member of the assurance team being, or having recently been, a member or member of the assurance team being, or having recently been, performing services for an assurance client that directly affect the subject matter of the assurance engagement.
Mintz S. M. ...
Examples of circumstances that may create this threat include, but are not limited to: dealing in, or being a promoter of, shares or other securities of an assurance client; and acting as an advocate on behalf of an assurance client in litigation or in resolving disputes with third parties.
Hayes, R., Dassen R., et al (2005) also noted that a familiarity threat occurs when, by virtue of a close relationship with an assurance client, its directors, officers or employees, a member, firm or member of the assurance team becomes too sympathetic to the client's interests. Examples of circumstances that may create this threat include, but are not limited to: a member or member of the assurance team having an immediate family member or close relative who is a director member of the assurance team having an immediate family member or close relative who, a former partner of the firm being a director or officer of the assurance client or an employee in a position to exert direct and significant influence over the subject matter of the assurance engagement, and acceptance of gifts or hospitality, unless the value is clearly insignificant, from the assurance client, its directors, officers or employees.
An intimidation threat occurs when a member or member of the assurance team may be deterred from acting objectively and exercising professional skepticisms by threats, actual or perceived, from the directors, officers or employees of an assurance client. Examples of circumstances that may create this threat include but are not limited to: threat of replacement due to a disagreement with the application of an accounting principle; and pressure to reduce inappropriately the extent of work performed in order to ...
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(Auditing and Accounting Ethics Essay Example | Topics and Well Written Essays - 3000 Words)
“Auditing and Accounting Ethics Essay Example | Topics and Well Written Essays - 3000 Words”, n.d. https://studentshare.net/miscellaneous/286524-auditing-and-accounting-ethics.
It also involves auditor’s responsibility towards the client. An engagement letter describes the lawful relationship or an engagement between an ‘audit firm’ along with its clients. The engagement letter involves within it the terms and the conditions of the engagement, which mainly addresses the opportunity of the particular engagement and the details of the compensation complying with the firm.
During this period, a relatively small number of accounting firms could perform audits for a relatively large number of entities. Professional accountants and auditors could render reports on the financial performance of different entities and could work for different investor groups.
According to the essay, 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 Statement of Auditing standard no. 2 states that there should be independence in mental attitude at all times is required. The factors include threat or intimidation, auditor's self -interest in getting an unqualified or other type of opinion. The auditor's job is to express his unbiased opinion on the fairness of the audit client's financial statements.
The factors include intimidation, self -interest and the like. The auditors opinion gives credence to the financial statements. The following paragraphs explain that independent auditors are the rule and not the exception (Snyder 2002).
In question 1 the different threats of independence as it is one of the most crucial characteristics of auditor. In question 2b, the ethical dilemma of the employee of a firm has been analysed with different point of view. In question 3 the liability of an auditor
From this definition the basic understanding of the purpose of audit is that auditors verify the financial information companies prepare and provide reasonable assurance to the shareholders and other stakeholders that this financial information is free from material
The research is based on existing eLearning projects in the three case studies, and the data is qualitative, based on interviews with key staff such as training and Human Resources managers, using software which uses the PC platform in a corporate workplace environment. The study is restricted to CD-ROM products.
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