Envalue the Auditor Independence Provisions Essay

Envalue the Auditor Independence Provisions - Essay Example The audit committee and the Charter of Audit usually offers independence of code of ethics and management of the company which assist in guiding the clients, third parties or suppliers on theories and concepts of independence (Federation of European Accountants, 2013). The independence of external auditors signifies freedom from those parties that have increase in the consequence published in the financial statement of the entity. The external auditors should be supported by the Audit committee of the company, and reference should be drawn from the public accounting codes and standards. The external and internal concerns are complicated when the nominally self-regulating divisions of the company offer consulting and auditing services. In order to solve this complication, Sarbanes – Oxley Act of 2002 is a legal solution. In case of statutory audit the most significant principle is regarded as objectivity. Before considering any non-assurance or assurance engagement, audit or en tering into any relationship with the client, the auditor should consider all the threats to their independence that might hinder principle of objectivity (ICISA, 2004). Regulations in the European Union There are various regulations within EU in relation to auditor independence. The major enforcement in case of auditor independence is directed through the Companies Act of 1985, and Companies Act of 1989. The Companies Act of 1985 states that it the accountability of the shareholders to appoint auditors rather than the directors at the annual general meeting. This theory has been stated so that the directors cannot influence the auditors by... This essay summarises the concepts, that are used today in the legal regulatory framework, and identifies the conceptual framework of auditor’s independence. Apart from this the regulations for auditor independence that also are discussed in the essay by the researcher, with respect to European Union, as this will assist in analysing how the auditors can keep their personal interest aside and focus towards an unbiased and flawless audit report. Audit firms and auditor must maintain their independence for the reports of the auditors to be free from any external, personal and organisational impairment. There are various ideas and assumptions present regarding the future development of auditing in context of independence. In US the audit control procedure states that the audit reports should be reviewed by another company once in three years. The researcher mentiones that this essay discussed all those factors which were enough to discuss how auditors can keep aside their persona l objectives and interests in order to support the quotes that have been mentioned at the beginning of this study. Auditors today are like examiners who check the annual performance of the companies in order to assist them in forecasting and decisions making. However, the researcher also concluds that if code of ethics and laws are not followed, then companies would function on wrong guidelines, and there are many examples that can be drawn from the recent financial crisis to describe how faulty judgement can lead to bankruptcy.