Auditor Independance

An auditor’s objective in an audit is defined as “to provide a high level of assurance through the issue of a positive expression of opinion that enhances the credibility of an assertion about an accountability matter” (Gay & Simnett, 2003, p. 745), while keeping its independence. Independence is defined as “ability to with stand pressure from management influence when conducting an audit or providing audit-related services, so that one’s professional integrity is not compromised.” (Gay & Simnett, 2003, p. 745) In order for an auditor to be independent, they are required to be independent in both mind and appearance. Without this independence present, the auditor’s objective is jeopardised. The professional independence of auditors has been held responsible for the many major corporate collapses and financial debacles in the United States and Australia. As a result of this, the professional regulators have been prompted to introduce a mass of reforms to avoid a similar repeat of these collapses. In the United States the Sarbanes-Oxley Act was introduced in 2002, while in Australia the proposal of Clerp 9 is being put forward and examined. The two Acts have resulted in significant changes to the professional independence of auditors in each country, both similarly and differently. As both Acts not only affect the companies and auditors in each of their respective country’s, but also to any audit firm, in both the United States and Australia, who are actively working as an auditor of, or for, a publicly traded company or its subsidiaries, both Acts need to be taken into perspective and the most rigorous of the two should be applied to avoid any breaches. The first significant change to be discussed is in relation to avoiding the occurrence of a conflict of interest between auditors and their companies. When a client of an audit company employs a previous employee of the audit firm, a conflict of interest arises…

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