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Internationally, various initiatives have been proposed to establish a standard or enforce some
consistencies across borders, in how the auditors ought to accomplish the audit objective, and what
financial statements clients should expect (ICAEW, 2010). The paper concludes that incessant
endeavors to reinforce audi. In this regard Delu (2007) who studied audit expectation gap in Ethiopia
found that there was agreement between auditors and users of financial statements that the auditor
must act independently; however, both also expressed their doubts on the practical applicability of
independence. If the characteristic of Independence is not adopted in the financial statements then
shareholders of the country would not be able to get an unbiased opinion of the auditor which was
the main reason for the appointment of auditor. Studies on auditors' independence and its effect of
actual audit quality and users expectation gap are useful to inform regulatory bodies and the
accounting profession in devising ways to enhance auditors' independence and the role in corporate
governance. Furthermore, the last non-audit service that is restricted to audit clients is expert services.
Data were analyzed using Pearson Product Moment Correlation with the aid of SPSS. Auditor
independence is a term which truly umbrellas many different matters, and which thus must be
understood fully and thoroughly in order to be understood properly altogether. We organize our
review around four main threats to auditor independence, namely, (a) client importance, (b) non-
audit services, (c) auditor tenure, and (d) client affiliation with audit firms. For each of the threats,
we discuss findings related to the incentives, perceptions, and behaviors of the auditor and the
client, as well as the effects of each threat on the actual and perceived quality of audits and financial
reports. Based on the review, findings show that there is a strong relationship between auditor
independence and audit quality. Like, the auditor can no longer provide their clients with legal and
expert services unrelated to the auditing of the auditor as well as the management functions. The
current momentum to establish publicly owned companies in Ethiopia is also considered as the need
for examining auditors' independence. Independence continues to be a problem when it comes to
finding out how accurate and credible investor finan. In general the purpose of external auditors in
society is to give reasonable assurance on fairnes the truthfulness of financial statements. This meant
that external auditors could do their jobs without being biased, therefore making financial audit
reports more reliable for investors, government bodies and the general public. Adobe Express Go
from Adobe Express creation to Issuu publication. However in recent times it has become even more
important after a number of firms have become bankrupt due to fictitious accounting methods, the
most infamous one being the Enron scandal of 2001. The results indicate that audit independence has
a positive relationship with audit quality and credibility, and audit quality has a positive association
with audit credibility. This was evidence to the potential of failure in independence between the
corporation and the auditor. It thus extends the frontiers of knowledge on critical factors affecting AI
in a developing country context and has implications for theory, policy and practice. The study is
conducted based up on review of literatures and identified the factors that possibly influenced
perceived independence of auditor. There is a level of complexities in the preparation of financial
statements that cannot be understood without having proper knowledge of accounting and finance.
How then should the public sector auditor carryout his duties in such a manner that enables him to
detect opportunities for corruption as he may not be in position to quantify or report it. QR Codes
Generate QR Codes for your digital content. In this regard Delu (2007) who studied audit
expectation gap in Ethiopia found that there was agreement between auditors and users of financial
statements that the auditor must act independently; however, both also expressed their doubts on the
practical applicability of independence. Download Free PDF View PDF Audit independence Just a
Dreamer chox Audit independence, quality, and credibility: effects on reputation and sustainable
success of CPAs in Thailand. This has been rather easily possible primarily because of the fact that
the chartered accountancy qualification is traditionally seen as a first-class business education,
leading to many different career opportunities. Resources Dive into our extensive resources on the
topic that interests you. More Features Connections Canva Create professional content with Canva,
including presentations, catalogs, and more. In doing this, five threats to compliance with the
fundamental principles of professional code of conduct and guide for members of the Institute of
Chartered Accountants of Nigeria (ICAN), issued in 2009, was examined.
Also necessary is the use of engagement letter as an appendix to Audited Accounts to explain and
create awareness to the users of Annual Accounts of what the CAMA, 1990 requires the duties of
auditors to be and what the auditors believes his legal duties entail. Adobe Express Go from Adobe
Express creation to Issuu publication. It's like a masterclass to be explored at your own pace.
Download Free PDF View PDF Audit independence Just a Dreamer chox Audit independence,
quality, and credibility: effects on reputation and sustainable success of CPAs in Thailand. The
preparers opine that failure to rotate auditors and the control of auditor appointment and
remuneration by the board is more AI constraining, relative to the opinions of both the auditor and
user regarding these factors. The debate will no doubt be vigorous, but the alternative is that we
accept the erosion of the profession and of our ability to continue to attract the best and the brightest
entrants. Influences on the independence of auditor both internal and external to the firm may impair
auditors' independence. QR Codes Generate QR Codes for your digital content. Based on the
review, findings show that there is a strong relationship between auditor independence and audit.
GIFs Highlight your latest work via email or social media with custom GIFs. Cross sectional field
survey of the quasi-experimental research design was used in this study because the survey relied on
a sample of elements from the population of interest. To browse Academia.edu and the wider internet
faster and more securely, please take a few seconds to upgrade your browser. The purpose of this
exploratory study is to review existing empirical studies on auditors independence to developed a
theoretical framework that facilitate further studies in least underdeveloped audit market. The result
showed that there is weak accountability in Nigeria due to weak accounting infrastructure, poor
regulatory framework and attitude of government officials. This literature review is conducted based
on published articles during the period 1976-2013 in nine leading journals related to auditing. The
concept of independence is very important in enhancing the contributions of the audit profession to
the sustainable development of the overall economy and the issue has becoming a discourse of
academics, professional and regulators in developed and emerging economies, studies addressing the
issue in Ethiopian and other least developing countries audit market context are scantly available.
Articles Get discovered by sharing your best content as bite-sized articles. This article reviews
auditor independence literature and factors affecting independence in order to determine the effects
of the factors on independence. Based on the review, findings show that there is a strong relationship
between auditor independence and audit quality. Statistics Make data-driven decisions to drive
reader engagement, subscriptions, and campaigns. Teams Enable groups of users to work together to
streamline your digital publishing. Likewise, audit quality and credibility significantly influence on
reputation that is also related to sustainable success. Lehman Brothers’ auditor, Ernst and Young, has
been accused of “malpractice”, “negligence” and “failure to exercise professional care” after they
apparently “failed to raise alarm on the bank’s accounting practices” (Watkins, 2010). The study
concludes that EPS is significantly influenced by prevention of error and fraud in audited financial
statements. It is important to understand the factors that auditors perceive as affecting audit quality
since these are the factors that affect actual audit quality. The finding of the review indicates that the
most mentioned threats to auditor independence are non-audit services, audit tenure, auditor-client
relationship and client importance. A typical example is the Nigerian crude oil blocks owned by few
individuals to the exclusion of the majority. The primary role of an external auditor is to present an
independent and unbiased audit report of a firm’s financial position. This initial concept of auditor
independence changed during the late 19th and early 20th centuries. This then led to the Sarbanes-
Oxley Act of 2002 which gave the responsibility of choosing an auditor to an audit committee rather
than the CFO (Locatelli, 2002).
However it is considered that an improvement in perception, however, will be no more than a short-
term victory if the reality is a fall in the quality of auditing. Further, weaken independence of external
auditor is a serious challenge for the government bodies that make tax liability assessment and
regulatory duties on the basis of audited financial reports. In the context of this new idea of the
corporation, the auditor's primary duty was to serve the needs of the collective proprietary interest
rather than a specific absentee-ownership interest. Periodic balance sheets were needed to determine
the portion of retained profit that could be validly distributed to the proprietary interest. Both
theoretical and managerial contributions are explicitly provided. While the independence regulations
helped to ensure quality audits and contributed to the high level of financial reporting we enjoy in
the United States, in today's increasingly complex business environment the ISB believes that some
revisions are in order. However this led to many auditors failing to be completely honest in their
work in order o refrain from aggravating their relationships with the corporations they audited and
consulted. This study attempts to explore the determinants of auditor independence as perceived by
Malaysian accountants using a self-administered mail survey. Studies on auditors' independence and
its effect of actual audit quality and users expectation gap are useful to inform regulatory bodies and
the accounting profession in devising ways to enhance auditors' independence and the role in
corporate governance. Auditor independency is a important determiner in the bringing of audit
quality. This collective proprietary interest essentially comprised domestic shareholders, that were
often large banks or wealthy investors, but increasingly the general public has become involved in
stock ownership. Resources Dive into our extensive resources on the topic that interests you. Over
the years, the economy of Nigeria has been bedeviled by sustained high rate of corruption,
conflicting financial reporting from various government agencies on petroleum income. Professional
accountants and auditors could render reports on the financial performance of different entities and
could work for different investor groups. Issuu turns PDFs and other files into interactive flipbooks
and engaging content for every channel. It is recognized as the primary attribute to be maintained by
auditors in all circumstances. Statistics Make data-driven decisions to drive reader engagement,
subscriptions, and campaigns. In the Companies Act 2006, Section 507 prevents auditors knowingly
or recklessly causing an. Articles Get discovered by sharing your best content as bite-sized articles.
Teams Enable groups of users to work together to streamline your digital publishing. The review also
revealed four threats to auditor independence, which are client importance, non-audit services
(NAS), audit tenure, and client’s affiliation with CPA firms. However, some studies indicated a
positive relationship while others showed contrary due to the type of study design employed, sample
size, data collection instruments. The study is conducted based up on review of literatures and
identified the factors that possibly influenced perceived independence of auditor. Cross sectional
field survey of the quasi-experimental research design was used in this study because the survey
relied on a sample of elements from the population of interest. The professional code of conduct at
international and local levels as well as the commercial codes that govern the business and economic
endeavors stated that professional accountants must be competent and independent to undertake an
audit and assurance services. Embed Host your publication on your website or blog with just a few
clicks. Digital Sales Sell your publications commission-free as single issues or ongoing subscriptions.
Studies on auditors' independence and its effect of actual audit quality and users expectation gap are
useful to inform regulatory bodies and the accounting profession in devising ways to enhance
auditors' independence and the role in corporate governance. Independent auditing has been an
important part of the corporate monitoring system since the mid-1930s, when it became a legislation
requirement after the Great Depression. Auditor Independence and Audit Quality: A Literature
Review. In conclusion, we have established that it is critical for external auditors to be independent
of the firms they audit.