Auditor Independence Revisited

1. The main rationale of an audit is to offer company shareholders with a proficient, self-sufficient view regarding if the yearly accounts of the corporation reveal a correct and reasonable view of the fiscal situation of the corporation and if they can be trusted. Independence is the major way through which an auditor shows that he can carry out his job in an objective way (Reynold, Deis, and Francis, 2014).   The auditor has to be independent from the customer corporation, in order that the audit estimation will not be persuaded by any link among them (Umar and Anandarajan, 2014). The necessity for independence comes up because in a lot of cases consumers of financial reports and different third parties do not have adequate details or understanding to know what is enclosed in a company’s yearly reports. Therefore, they trust the auditor’s independent review (Gul, Jaggi and Krishnan, 2010). By Sally becoming the CFO, she can influence the opinion of auditors on whether the financial reports of the corporation are properly made or not. As Sally hosted the dinner, there has been non-appearance of independent acts. It is necessary that the auditor not only performs independently, however appears independent also. In case an auditor is actually independent, however one or additional aspects propose otherwise, this could possibly bring about the ending that the audit report does not signify an accurate and reasonable analysis. Independence in appearances will lessen the chance for an auditor to proceed otherwise than independently, which finally attaches trustworthiness to the audit report (Paterson and Valencia, 2011). 2 . Since Sally has taken the post of Financial Controller in this year at Madeira 3 of the threats, are: Anandarajan, A., Kleinman, G. and Palmon, D. (2008). Auditor independence revisited: The effects of SOX on auditor independence. International Journal of Disclosure and Governance, 5(2), pp.112-125. Blay, A. and Geiger, M. (2012). Auditor Fees and Auditor Independence: Evidence from Going Concern Reporting Decisions*. Contemporary Accounting Research, 30(2), pp.579-606. Gul, F., Jaggi, B.L. and Krishnan, G.V. (2010). Auditor independence: evidence on the joint effects of auditor tenure and nonaudit fees. Auditing: A Journal of Practice & Theory, 26 (2), 117–142. Paterson, J.S. and Valencia, A. (2011). The effects of recurring and nonrecurring tax, audit-related, and other nonaudit services on auditor independence. Contemporary Accounting Research, 28 (5), 1510-1536. Reynold, J.K., Deis, D.R. and Francis, J.R. (2014). Professional service fees and auditor objectivity. Auditing: A Journal of Practice & Theory, 23 (1), 29–52. Umar, A. and Anandarajan, A. (2014). Dimensions of pressures faced by auditors and its impact on auditors’ independence. Managerial Auditing Journal, 19 (1), 99-116.