85.Auditor independence
Shareholders need to have confidence that the
auditors have assessed relevant information
objectively, and that they have scrutinised evidence
critically and independently. Shareholders also want
to be sure that the auditors have undertaken their
work and made their judgements free from any bias,
and without being influenced unduly by management
who prepared the financial statements.
There are many detailed regulations and professional
standards to which audit firms and all their staff must
adhere, and which support both the fact and
perception of auditor independence. In simple terms,
auditors may not do anything that should be the role
of management or that creates a mutual interest.
Specific requirements vary around the world, but
generally include:
Prohibiting the auditors from holding an interest
in (whether financial or through close relationship
with) the company they are auditing;
Prohibiting the auditors from providing the
company with certain services (such as
implementation of accounting IT systems or hiring
employees) that could compromise their
objectivity; and
Requiring key personnel on the audit to be
changed from to time to time, so that fresh pairs of
eyes are brought to bear including regular rotation
of the lead audit partner.
The most important factor underpinning auditor
Tags:
Auditing Broad Questions