Question

list and briefly explain at least 3 possible ways that auditor independence could be further enhanced/improved beyond what is currently in place in practice or through auditing standards

Answer 1

The independence of auditor is the most important factor that determines that the quality of audit and the integrity of the financial statements.

If the auditor is independent then this is possible that every error or change required will be corrected or highlighted.

Below are the ways in which the independence of an auditor can be increased.

1. Removing the conflict of interest

Conflict of interest happens when the auditor is holding some interest in the company that he/she is auditing.

The interest may be in the form of holding some of the company shares, this causes the conflict of interest. ‘

In such cases cannot act independently

2. Checking self-review threat and removing

This threat happens when the auditor is to audit his own work.’

This mostly happens in cases where the books of the firm of the auditor has been prepared by the auditor itself.

3. Related parties threat

This threat happens when the CEO and the auditor are related, this causes the related parties relations and lead to reduction of independence.

4. Tenure of audit firm

Tenure also influence the independence of auditor, if the tenure of the instances of auditing is being large then this is possible that the auditor may develop a interest in the firm and loose the independence.