Question

importance of an independent audit(5 in number). please include a brief introduction and conclusion(around 4 sentences each)

Answer 1

Independence means that the judgement of a person is not subordinate to the wishes of another person and it requires the auditor not to act under any influence and therefore complete his work in an unbiased manner.

Importance of an independent audit

1. If the auditor maintains high degree of independence, credibility of the financial statements is enhanced.
2. Independent audit report will be accepted and respected by all the stakeholders.
3. An independent audit ensures that there compliance with generally accepted accounting principles and any deviation from these should be reported by the auditor in his report.
4. The management can easily judge the reasons for losses and try to control it. Independent audit also helps to ensure general reliability of the accounting system maintained by the management.
5. Independent audit acts as a moral check on the employees and prevents them from committing frauds. Also the financial institutions can place reliance on audited financial statements while making decision about the credit worthiness of loan applicants.

Hence it can be concluded that the importance of an independent audit is immense and it not only helps the entity whose financial statements are being audited but also the stakeholders and various other entities. The auditor conducting the independent audit should be free of any interest apparently as well as in reality.