Auditors independence Essay Example | Topics and Well Written Essays - 2500 words

Auditors independence - Essay Example Auditor independence is a term which truly umbrellas many different matters, and which thus must be understood fully and thoroughly in order to be understood properly altogether. Basically, in order to understand the meaning of auditor independence you must first understand the fact that basically the professional independence of auditors has truly been held responsible for that of the many corporate collapses and financial debacles that have taken place worldwide, and that this explains the essentiality of understanding the importance of the independence factor in the auditing sector. Independence is generally understood to refer to a mental state of objectivity and lack of bias. They are totally opposed against the new ruling and voiced many of the same concerns that were seen from other CPA's. He expressed concern that the regulation of the new rule cannot be sufficient by itself. It's also necessary that public investors-the users of financial reports-perceive that the numbers ar e right. These are basically and for some places entirely restricted because they give the appearance that when auditors provide these services to audit clients they are acting as an advocate for the audit client. Brown goes on then to even further illustrate this point by showing that in Canada we are looking at the SEC's proposal closely and extensively and "will formulate our regulatory response partly on your experience. It is truly and absolutely a key factor that the audit committee identifies independence violations, because they are on the front line and are closest to the action. The creation of these principles was due to increasing concern that auditors were not remaining totally independent when performing the audit. Other times the consulting professionals will have little or no interaction with auditors especially in large firms. If firms miss their earnings expectations even by a slim margin the result is an immediate decrease in stock prices. Furthermore, the last no n-audit service that is restricted to audit clients is expert services. The initial concept of auditor independence, which arose during the 19th century, was based on the premise, primarily British in origin, that a principal duty of professional accountants and auditors was the oversight of absentee investments in the existing and former colonies of the British Empire. 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. The concept of auditor independence during this era did not conceive of auditors as advocates for audited entities; British investors explicitly forbade auditors from investing or working in the businesses that they audited. At the same time, as long as auditors maintained their primary loyalty to the investors back home, the scope of professional a