In: Accounting
What does it meant to be independent in facT and appearance - are they the same thing?
Ind. of fact means that auditor is not biased and have free mindset when planning and exeuting an audit to act with integrity, and exercise objectivity and professional scepticism. That is auditor must not be biased in his approach to audit and should not be influenced by any interest he has in entity.
whereas Ind. of appearance means that auditor has not avoided any facts or circumstances that are so significant that a reasonable and informed third party, having knowledge of all relevant information, including safeguards applied, would reasonably conclude a firm’s, or a member of the assurance team’s, integrity, objectivity or professional scepticism had been compromised.
What do you think an auditor must adhere both requirements?
Auditor in order to honor the basic funtion and requirement of audit that is provide assurance to the stakeholders about the correctness of financial statements should adhere to both requireemnts as per SEC.
What might happen if an auditor only adheres to fact or appearance?
If auditor only adhered to one of the two then it is quite possible that they may not perform their duties independently and may get influence by their own decision or the management.