Question

udit independence is important so that auditor’s opinion can be unbiased, free from undue influence or conflicts of interest to override The professional judgement.

Explain the concept of independence and discuss the broad categories of threats to independence.

Answer 1

Independence of auditors means auditor's work should not be influenced in any way. For example, auditor should be unbiased.

The independence of auditors may be affected by the following reasons:

i) Relationship with client: If there exists a good and healthy relationship between auditor and client it may influence the audit to a large extent because the auditor may try to satisfy the client without meeting the audit standards.

ii) Role in Management and Guidance: The auditor should not be responsible for looking after the client's management or providing guidance and advice to the client.

iii) Financial Interests: If the client is paying the audit fees to the auditor or if the auditor owns stock in the client's company, then the auditor may work in favour of the client.