Declaration Of Independence Essay

It is argued that independence is the most important for accountants especially working as auditors or assurance providers for the following reasons. Firstly, corporate governance reports have focused on the reliability of financial information as a key part of corporate administration. Shareholders and different partners require a dependable record of executives' stewardship to have the capacity to take choices about the organization. Assurance provided by independent auditors is seen as the quality control on the dependability of data. In addition, a report by independent external auditors on the accounts would create more credibility, which improves the attraction of the company to investors. Besides, an absence of independence appears to mean that vital audit work might not be done and the shareholders are not getting

In agency theory, the owners set the primary objectives of the corporation and are known as the principals. However, principals might not have knowledge or skill for getting the targets executed. Hence, principal approves the mangers to act as agents and a contract between principal and agent is made. Under this contract, the agent ought to not only remain faithful to the objectives but also protect the interest of the principal. Corporate governance is now the control of management through outlining the structures and procedures. In fact, the shareholdings are widely spread especially in modern corporations. The management or the agent selected by the shareholders will pursue the targets set out by the shareholders such as maximize the return. As the principals who are widely scattered, it may be hard to counter this in the lack of proper systems in place as regards timely disclosures, monitoring and oversight. Then, corporate governance puts in place such systems of