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Why is it necessary for a CPA to be prohibited from having financial or personal connections...

Why is it necessary for a CPA to be prohibited from having financial or personal connections with a client? Provide an example of how a financial connection to a company would impair an auditor’s objectivity. Provide an example of how a personal relationship might impair an auditor’s objectivity.

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Having the financial or personal connections with the client will have impact on individuality of the auditor. There will be conflict of interest as the client may influence the decisions of auditor in audit.

For example, the Auditor may be a major shareholder of x Ltd.Here,it may have the impact on independence of the auditor and he may express the opinion which will not have any negative impact on the company even though there is any material mistatement caused either by fraud or material misstatement as he is financially associated with the company.

And again for example if the auditor appointed as auditor for the company where his brother was CEO, then the auditor may not make his decisions independently as his brother may influence the decision of auditor.

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