Question

1. Why is it important for CPA to be independent?

2. What are 2 consequences of them not being independent?

Answer 1

Answer to Question No.1:

The audit is an independent examination of financial information of any entity, whether profit-oriented or not, irrespective of the size or legal form of the entity to express an opinion thereon.

Many stakeholders such as shareholders, employees, management, lenders & government agencies, etc rely on the financial statement of an entity for their requirements. If CPA does not have independent or biased in their approach then in such a scenario unable to issue the true & fair view about the financial statement & no one will trust the report issued by the auditor.

Accordingly, CPA to be independent & it compromises of both independence of mind as well as the independence of appearance.

Answer to Question No.2:

Two consequences of them not being independent:

1. If the CPA is not independent in such a case he is unable to issue the true & fair view on the financial statement & the same is not respected by the stakeholders as they might issue their audit report through influences of the management.
2. If the CPA is not independent then CPA will not be able to avoid the conflict of interest & not able to ensure the integrity, the objectivity of performing an audit. If the CPA is not independent they lead to the use of the biased approach while conducting the audit which is very critical situation for the stakeholders.