Question

How might financial incentives in the form of client services unconsciously introduce auditor bias into the independent audit function? Give real-life examples.

Answer 1

Independence is not easily achieved where an auditor is hired, paid, and fired by the same corporate managers whose activities are the subject of the audit,” means that threats of independence is there, but must be handled carefully so not to bring about a threat. An auditor must realize that he or she is working for the public interest first and for most, in return that should cut out any and all forms of bribery and financial
incentives. Financial incentives in the form of client services unconsciously introduce auditor bias into the independent audit function; because the auditor is unconsciously aware that the financial incentives are actually bribes in order to obtain the audit to suit the company’s needs. An auditor should never be bias in any means and conduct the audit in an honest and factual way.

Example

The auditor is assisting in selling ABC Company while also serving as the auditor for the company.

Issue

The auditor may issue a favorable report to increase the sale price of ABC Company.