Question

Audits are performed for companies by public accounting firms who are paid by the client; gaining the firm a profit. Within the business community some believe that the profit motive (i.e., audit fees, other allowable non-audit services provided by the audit firm) compromises their ability to be "independent". This is why some propose the audit function should be performed by a government agency instead of public accounting firms. Do you believe that public accounting firms could be influenced by profit motives and this could compromise their independence? If yes, what other options (other than governmental involvement) might correct such bias? What changes would this option bring? If notwhat is your argument for keeping audits with public accounting firms the same way they are performed today?

Answer 1

Yes, public accounting firms gets influenced by the audit fees while reporting on the financial statements examined by them, the auditor is influenced by the client in many situations which are already known to the world, wherein client puts a pressure on the auditor as to audit fees payable and manipulates the report to be issued by the auditor, especially this type of pressures occur in case of going concern effects disclosure.

Here the experience of the auditor matters, where he have significant power to communicate with the client.

The other means through which this type of independence is payment of audit fees through other medium and not directly through the client.