The Threat To Auditors Independance And Impartiality
This research is basically to access and analyse the threat to auditor independence and impartiality. This is crucial because the position of an auditor when auditing a financial statement will determine if he or she will be independent and impartial when drawing a conclusion on a financial report. This is why this research is very important. What this research wants to assess is to find out if auditor’s independence and impartiality can be threatened through offering non-audit services to their clients.
Financial report is very important to stakeholders of an organisation. It is also important to prospective investors interested in an organisation. It is also important to the general public as a whole. Therefore, for this reason, the authenticity of a financial report is very crucial and important.
This validation is authenticated by a set of people called auditors.
Stakeholder, investors and the general public will rely on this authenticated report for making decision. However, there is a fact that this report may be misleading and this calls for concern. This is because auditor often offer further services to their clients other than auditing called non-auditing services which may make them impartial when auditing such company’s financial report because of money been realised from non-audit services. This is when Auditor independence and impartiality could be threatened.
This research will be based on this topic, finding whether the provision of these non-audit services can impair the independence and impartiality of auditors.
1.1 BACKGROUND History reveals that audit is a Latin word meaning “he hears”. Auditing originated in those years when individuals entrusted with public funds were required to give an oral account of their handling of those funds. Porter (1997)
An opinion of an independent chartered accountant is needed to give the public rest of mind that the sets of accounts presented were true and fair and also conform to lay down standards.
Independence is the cornerstone of auditing; Stewart (1977) quoted by Porter. In carrying out the audit assignment, the auditors must be independent i.e. the sense of being self reliant and his/her professional judgement not being subordinated by the opinion of others. (Porter, 1997, p.65)
It is very important for the auditors to be independent otherwise the audit report will be undermined and lose its value. In order to make the users of information to have faith and rely on the audited account, they must be sure that the audited accounts are independent of entity, its management and other interested party.
This is reflected in the fundamental principles of external auditing- objectivity and independence which state that auditors are objective and they express opinion independently of the entity and its directors. As the guide to professional ethics statement (GPES) 1:201: integrity objectivity and independence explains, objectivity is essential for any professional person exercising professional judgement. Objectivity is sometimes described as independence of mind (Dunlea, A.