The fundamental importance of auditor independence. An auditor is a qualified person who carries out the audit assignment and reports on the ‘true and fair view’ of the client entity’s financial statements so that the users of financial statements can rely on the reliability and credibility of the financial statements. Before issuing the report, the Widgets audit partner should also discuss Marker’s independence assessment and the safeguards applied with the Widgets board. The term “reasonable care and skill” is consistently increasing with time and cases. We've received widespread press coverage since 2003, Your UKDiss.com purchase is secure and we're rated 4.4/5 on Reviews.io. The opinion itself shall be credible and for that the auditor’s objectivity shall be beyond question. This create the risk of self-review threat on the audit independence and self-interest threat as there was a fear of losing a large client which lead to failure to inform investors on Enron’s non-disclosures (Tom Campbell, 2005). It is critical for an auditor to be independent of the firms they audit due to many reasons. Safeguards are actions or other measures that may eliminate threats or reduce them to an acceptable level. Auditor independence tends to be an extremely important component across the audit process, because of the reason that it directly influences the judgment that is put forth by the auditor. The ethical principles for the auditors included in part A are integrity, objectivity, Professional competence and due care, confidentiality and Professional behaviour (Arens, 2013). Although the third party who made the decision to take over the business was unknown to the auditor, was owned a duty of care as the third party was relied on the publicly filed audited financial statement of a company (Arens, 2013). The primary purpose of an audit is to provide company shareholders with an expert, independent opinion as to whether the annual accounts of the company reflect a true and fair view of the financial position of the company and whether they can be relied on. Opposite to this case, In Columbia Coffee & Tea Pty Ltd v. Churchill (1992) where the Judge held the decision against using the audit firm’s manual to rule that the auditor owed duty of care to the third party. Parts B and C illustrate how the conceptual framework is to be applied to identify and address threats in specific situations (Arens, 2013). The client requires persons other than management to ratify or approve the appointment of a firm to perform an engagement. This independence can be maintained through external constraints (i.e., legislation and regulation) or through the profession itself, which will maintain independence to preserve its market value (Kinney 1999). Auditor independence simply means the ability of the auditor to adopt an approach with integrity and objectivity within the audit process. 4. Leadership that stresses the importance of ethical behaviour, Resignation from engagement can be extreme safeguard but in come circumstances the only option available. An auditor who lacks independence virtually renders their accompanying auditor report useless to those who rely on them. If the leader or senior partner of the firm follow the ethics or act in ethical way, it will encourage other staffs to follow the same path and be ethical as well. The Technical Under the recommendation 3.2 of NZX Corporate Governance, no employee of the company can attend the committee meeting without the invitation from the audit committee which protect the independence of the audit committee from any undue influence (NZX Corporate Governance Code 2017, 2017). Dissertation Accounting firms sometimes engage set audit fees at less than the market rate and make up for the deficit by providing non-audit services, such as management consultancy and tax advice. As per the section 207W of the Company Act 1993 and principle 7.2 of NZX Corporate Governance Code, the board of directors must involve the auditor in the meeting of the shareholders and the auditors are free to communicate the concern of the auditor as auditor (NZX Corporate Governance Code 2017, 2017) (Companies Act 1993, 2018). During the 1990s, the financial importance of non-audit services to public accounting firms increased dramatically, and the growth of the consulting divisions or companies associated with the largest audit firms is seen as a significant possible impairment to the independence of audit partners (D A. Moore, 2004). The ‘familiarity threat’ caused by using the same senior personnel on an audit has long been recognised by the professional bodies as a potential problem. This would lead to large numbers of people being unemployed which is a negative thing as it could cause a recession or even a depression if too many firms in a critical industry become exposed as frauds. Familiarity—when an auditor becomes too sympathetic to the interests of another party because of a close relationship. Auditor independence is mostly challenge by the close relationship between the auditor and a client company which provide the audit fees. The recent developments have imposed higher responsibilities on auditors and wider the applicable standard of care, wider the definition of negligence and duty of care to owed to third party or in another word, we can say that the auditor’s responsibility has been increased with time and cases which demand for higher independence level in auditing. It was one of the landmark decision on auditor’s responsibilities by Justice Moffitt where an auditor was referred to as a “skilled inquirer” who prefer to know by direct investigation rather than rely on client management and staff (Kujinga, 2009). Auditors must be able to review material objectively and come up with a neutral, accurate, and honest report on the outcome of their investigations. Actual independence is quite straightforward. 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