Question

What is the independence standard? Why is it important that users perceive auditors to be independent? Can an auditor be independent in fact, but not in appearance? Explain.

Answer 1

Independance implies one ability to act in integrity and objectivity.

Independance standards are described in AICPA code of professional conduct rulRule 101 and interpretations mere under as in existence on April 26, 2003.

independence standard gives information regarding the objectivity of auditor in an audit.

Yes, it is important mat users perceive auditors to be independent. Reasons are follows :-

1. auditor can give his work genuinely when that auditor has the sufficient independence from the management.

2. To decrease the audit risk also the auditor has to be independent.

3. When the auditor is having independence then only the work done by that auditor is reliable.

Yes, the auditor can be independent in fact if

The auditor does not attract to the facilities and consideration given by the management.

The auditor does not have any interest and ownership in the organisation.

The auditor does not have any deficiencies prescribed by the appropriate auditing bodies.

These are all the information required to solve the given question.

I hope, all the above mentioned information and explanations are useful and helpful to you.

Thank you.