Independence of auditing in all engagement activities - Essay Example

The factors that influence an auditor to present an unwarranted unqualified opinion includes threats or intimidations as well as the external auditor's self -interest. The auditor's sole responsibility is to issue an opinion on the fairness of the financial statement assertions. Without exception, all external auditors should not allow their independence to be affected by his or her own interests. International Auditing Standards requires that all external auditors should only continue on an audit engagement if they feel that their self interests affects their independence.

Independence mean not only independence in fact but also go hand in hand with independence through appearance. The auditing Standards on independence rule requires that the external auditor must not have any material self interest in the clients. An auditor has self interest if the auditor, the auditor's spouse and children are owners of shares of stocks in the audit client's business. The Companies Act of 1948 is the legal framework for external auditors to follow in terms of independence (Power 1997, 17).

Clearly, many auditors will not allow their independence to be affected by self -interests . In addition, all external auditors must not allow their independence to be influenced by self - review. The auditor is must consider if self -review will affect his independence in the performance of his or her audit programs. An auditor who is a relative of the audit client is definitely not independent. An auditor that has a loan arrangement with the audit client that is material in nature is not independent of the audit client.

Clearly, it is mandatory that all external auditors will not allow their independence to be affected by self - review.Further, all external auditors must not permit their independence to be influenced by advocacy. The auditor's membership in an organization that he is auditing is definitely not being independent in terms of auditing a client. The Code of Ethics for external auditors requires that the external auditor must not be a current membership in an organization if he or she intends to audit such organisation.

Any sign that creates a climate of doubt as the external auditors not complying with the auditing standard of being independent both in fact and in appearance should cause the external auditor to give up the client immediately. Definitely, all external auditors should not allow their independence to be affected by advocacy. Furthermore, all external auditors must not permit their independence to be affected by familiarity. It is normal that many external auditors use lesser time to finish their audit assignments for many of their former audit clients.

The repeat auditors will just focus their repeat audit on items that are interent risks like cash and small inventories. Also, a repeat auditor knows that company has a strong or weak internal control. Thus, internal control verification time is lessened. One advantage for repeat auditors is that these external auditors already know a lot of the company's basic financial ins and outs in terms of presentation of the balance sheet, income statement and statement of cash flows. However, the auditor must still scan and do test audits on low value and less audit risk accounts like buildings and factory machines.

The external auditor must complete each repeat audit engagement with a prior client as if, it was a new audit. The only difference with the repeat