Question

In: Accounting

describe the two types of indepedence that an auditor must have

describe the two types of indepedence that an auditor must have

Solutions

Expert Solution

Internal and external auditors must be independent in the process of auditing work. Such independence is required for fulfilling the objectives of auditing.

Required types are as below:

No.1) Strategic independence: Finding the approach for doing audit is strategy. An auditor must be free for formulating a strategy and there must not be any outside influence, such as an influence from the management of the company. A strategy is based on a method which may think appropriate by an auditor, like an auditor check invoices along with cash payment vouchers; the management should not fore to do so.

No.2) Presenting independence: Auditors present his report of auditing free from any influence. There are so many stakeholders, shareholders, lenders, banks, tax authority, etc. Each such stakeholder must have their own interest to be protected; therefore, reporting should be unbiased and independent. Suppose the management may want to show low amount of profit for curtailing tax and dividend to shareholders but an auditor must not listen it.


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