We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Provision of Non Audit Services by the Auditor to the Audit Client Is a Threat to Auditors' Independence - Essay Example

Comments (0) Cite this document
Summary
Provision of Non Audit Services by the Auditor to the Audit Client is a Threat to Auditors' Independence. Evaluate the Seriousness of this Threat Compared With Other Threats to Auditors' Independence and Identify the Effective Means of Strengthening Auditors' Independence Table of Contents Table of Contents 2 1.Introduction 3 2…
Download full paperFile format: .doc, available for editing
Polish This Essay92.6% of users find it useful
Provision of Non Audit Services by the Auditor to the Audit Client Is a Threat to Auditors Independence
Read TextPreview

Extract of sample
"Provision of Non Audit Services by the Auditor to the Audit Client Is a Threat to Auditors' Independence"

Download file to see previous pages Introduction The value of an audited financial statement depends on the auditor’s independence. Accounting scandals such as Enron of the United States as well as HIH Insurance of Australia have created doubts regarding auditor’s independence and the value of their audit. The familiarity that is developed from the long audit tenure and the economic dependence arising from the non audit services and social bond developed between the auditor and the auditor’s client through long-term association have raised questions regarding auditor independence (Carson & Simnett, 2006). Non Audit Services (NAS) are also identified as ‘management advisory services’. Regulators believe that non audit services provided to audit clients is a serious threat to the auditors’ independence. Regulators believe that conflicts of interest occur and fee dependence has a damaging affect on auditor independence. Audit firms often defend themselves by saying that fee dependence does not influence them and audit and non audit services are performed independently by separate staff (Houghton & Ikin, 2001). It is also opined that non auditing services help in reduction of total costs, improve technical competence and intensify competition. The audit firms, the audit clients and regulatory bodies can bring about efficient services mix through market interaction (Arrunada, 1999). 2. Literature Review 2.1 Non Audit Services of Auditors The services that external auditors provide to their clients can be categorised into consulting, tax and audit. Consulting and tax are often referred as non audit services. Section 201 of the Sarbanes Oxley Act lays down the services which the external audit firm should not perform. They cannot perform bookkeeping services related to financial statements and accounting records. They cannot design or implement financial information systems. They cannot perform valuation or appraisal services, actuarial services, management functions, legal services, litigation or administration related expert services. The auditor is also prohibited from providing marketing and planning related non audit services to the audit client and tax services to the management team or the family members of the team (Burke & et. al., 2008). 2.2 Threat to Auditor’s Independence It is believed that NAS services of auditors change their role from that of an outsider who can take a transparent view to that of an insider who actively participates in the decision making and acts as an advisor. The economic bond that is created between the audit client and the auditor through their contract hampers the auditor’s independence. In order to carry out a comprehensive analysis of the independence of auditors, it is essential to examine the marginal fee dependence that results from the NAS services in addition to the total fee dependence. It has been stated that auditors should factually as well as in terms of appearance, be independent. NAS has an impact on the perception regarding the independence of auditors and it creates doubt regarding the authenticity of the auditor’s information (Francis, 2006). Legislations have banned the provision of several NAS by auditors for preserving the auditor’s independence. Regulators believed that auditors could go to the extent of sacrificing their independence in order to retain clients who pay large non audit fees (Defond & et. al., 2002) The various threats ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Provision of Non Audit Services by the Auditor to the Audit Client Is Essay”, n.d.)
Provision of Non Audit Services by the Auditor to the Audit Client Is Essay. Retrieved from https://studentshare.org/finance-accounting/1443878-provision-of-non-audit-services-by-the-auditor-to
(Provision of Non Audit Services by the Auditor to the Audit Client Is Essay)
Provision of Non Audit Services by the Auditor to the Audit Client Is Essay. https://studentshare.org/finance-accounting/1443878-provision-of-non-audit-services-by-the-auditor-to.
“Provision of Non Audit Services by the Auditor to the Audit Client Is Essay”, n.d. https://studentshare.org/finance-accounting/1443878-provision-of-non-audit-services-by-the-auditor-to.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Audit
However, the fact that the underlying principle in auditing is the concept of ‘opinion’, leaves the process of auditing with much to be desired, considering that conflict of interests or biased opinions have arisen from the auditing firms in relation to the truthfulness and accuracy of the transactions and financial reporting of their clients, eventually resulting to financial crisis, scandals and company failures that could eminently have been avoided, should the auditing reporting and opinion have been fair and balanced (Deloitte, 2012 p2).
6 Pages(1500 words)Essay
Rotation of Auditors Improving Quality of Audits
The rotation of auditors is one of the criteria that propose towards the quality of audit in most of the cases.The integrity of the financial statements is contingent upon the audit. Audit of the financial statements elaborates the dependability of the users of the financial statements upon the reliability of the information provided in the financial statement.
6 Pages(1500 words)Essay
Does Audit Regulation Ensure Auditor Independence
This research paper shows that independence has been examined as "an intensely felt professional philosophy". It is supposed that part of the solution in deciphering ethical impasses regarding potential and identified risks to assessor independence is to put more stress on professional beliefs.
41 Pages(10250 words)Dissertation
DOES AUDIT REGULATION ENSURE AUDITOR INDEPENDANCE
The Ethics Committee of the International Federation of Accountants has also highlighted the notion of independence as an ethical subject in its principles
40 Pages(10000 words)Essay
Audit and assurance
The audit, which is mandatory and is required as per the legal obligations, is some times referred to as statutory audit. The statutory audit is going through a period of criticism and change. This is partly because of the failure of
6 Pages(1500 words)Essay
A report in the context of the audit of public companies listed on the London Stock Exchange regarding the two issues that the committee decided against implementing
The decision as to whether audit rotation should be made compulsory has become a ground for discussion in the U.S. and the world in general for over half a decade (Chi et al 2009). While the proponents of mandatory audit firm rotation boast of the
6 Pages(1500 words)Essay
Discuss the arguments for and against compulsory audit firm rotation and also for and against a total ban on audit companies(by which is meant firms of accountants) carrying out non-audit services
scandals of Enron and World Call in the early 20th century which involved the audit firms as accomplices of corruption and frauds the audit firms’ role and responsibilities have come under huge question. People all over the globe have started to ponder on the pros and cons of
7 Pages(1750 words)Essay
Auditing Theory and Practice
The professional bodies have been working on the ethical standards for a long time. Consequently, they enlist principles and threats to them. Moreover, the professional bodies also provide examples explaining
6 Pages(1500 words)Essay
Audit
In April 2014 the European Parliament has voted for bringing mandatory auditor rotation into the EU region. European-listed companies, financial institutions, and banks will have to hire new auditors every 10 to 24 years. Appointment of a new auditor every decade can be extended in cases when companies appoint another audit firm.
8 Pages(2000 words)Essay
Summarise the following papers
ve focused on the status of audit quality, the factors that influence the audit quality as well as the consequences of audit quality on a number of variables. Some of the studies are reviewed in this section. One study that focused on the status of audit quality is a
20 Pages(5000 words)Essay
Let us find you another Essay on topic Provision of Non Audit Services by the Auditor to the Audit Client Is a Threat to Auditors' Independence for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us