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Importance of Independent Auditing - Essay Example

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Summary

"Importance of Independent Auditing" paper argues that public confidence in financial markets and the conduct of public interest partly relies on audit reports; the company should contract an independent auditor to avoid compromising the credibility of the reports and opinions. …

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Subject: Finance & Accounting
Type: Essay
Level: Undergraduate
Pages: 1 (250 words)
Downloads: 2
Author: kelsie58

Extract of sample "Importance of Independent Auditing"

Auditing Audit reports provide the company shareholders with a proficient, independent view as to whether the annual accounts of the company reflect a fair and true interpretation of the financial position of the company and whether the shareholders can rely on the annual accounts. Independence is the focal means by which auditors prove that they can impartially execute audit tasks (Regan, 2003). The contracting of one of Mary Maid Service's partner’s uncle to carry out auditing casts doubts over the auditing process. The Uncle may give false opinions about the company to maintain good relationships with his nephew/niece who is one of the shareholders. Additionally, by charging low fees, the Uncle might be protecting his commercial interests.

Most audit firms that charge fees lower than the market rate make up for the deficit by providing non-audit services such as tax advice. In such a case, the interests of the auditor to protect his commercial interests may contradict protecting shareholders’ interests. Contracting the partner’s Uncle may also expose the company to self-interest threats from the partner. Therefore, it is in the best interest of Mary Maid Service that the Uncle to one of the partners does not audit the company’s financial statements.

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