External Auditor Independence: The Importance Of External Auditor Independence

1072 Words5 Pages
1.0 The Meaning of External Auditor Independence and The Importance of External Auditor Independence
1.1 Meaning of external auditor:

The role of auditing is divided into two, namely internal audit and external audit. Internal audit works in a company organization and reports to committees or directors. They assist in company development and risk management within their company. They ensure that risk management runs effectively. Internal audit tends to persist and revolutionize the system within a company.
The external auditor is an accountant who works independently of a particular company. Their task is to scrutinize the company's records and operations to ensure that the company's annual financial statements are exact. External auditors
…show more content…
Every external auditor has their own objectivities. Objectivity is a fair mental attitude that let auditors to perform appointment in such a manner that they believe in their work product and that no quality cooperation is made. These objectivities may not be achieved because of the areas of risk. They are several areas of risk to external auditor objectivity. The main area of risk is social pressure. Social pressure may occur when an auditor is exposed to pressures from external organization. For example, a representation those external auditors expect a certain number of findings to be generated. The management expects each participation should produce better findings. This is also can put excessive pressure on internal auditors. The example situation also may occur when the auditor has knowingly or mistakenly raised issues in the past when there were no…show more content…
This risk may arise when an auditor reviews his or her own work performed during a previous audit. For example, an auditor may audit a department repeatedly or in continuous years. Hence, the auditor may provide consulting services in relation with a system execution that they subsequently must audit. Moreover, the auditor may also put up recommendations for functional transformation and subsequently review operation that are changed with those recommendations accordingly. All of these examples represent conditions in which the auditor could become less vital or lack due to the difficulty of maintaining objectivity when reviewing their work. Last area of risk is intimidation risk. Intimidation risks arise when an auditor is acting objectively by risks or being overtly by audit clients and other interested parties. For example, auditors being threatened with dismissal or replacement in relation to a client engagement. They can also being threatened with litigation. The most likely to happen is the auditors are being pressured to reduce inappropriately the extent of work performed in order to reduce

More about External Auditor Independence: The Importance Of External Auditor Independence

Open Document