Auditing and Accouning Ethics - Essay Example

The assertion of independence is at the core of the audit function. It is assumed by shareholders that auditor formulate their opinion on the financial information independently from the influences of the management of their client’s company. In case of Enron auditors are blamed for not giving regards to their professional obligations and maintaining independence. Prior to Enron case external auditors were observed to be highly dependent on their client’s business. They were providing not only audit services but also non-audit services that impaired the quality of audit and it was surely detrimental factor for the perception of auditors’ independence amongst shareholders.

Independence that is seen as a form of mental state of auditors needs not only to be practiced but also displayed to shareholders in order to keep their trust and confidence in the opinions furnished by auditors (Lindberg and Beck). Reasonable assurance is related to the planning and performing audit for accumulation of audit evidence that is considered sufficient to suggest that the financial statements are free from material misstatements, errors or even frauds. The reasonable assurance does not imply that the elements of errors or frauds are completely covered but it is based on the understanding that the management provides full access to auditors who then implement different audit techniques to collect sufficient evidence to formulate their opinion.

The perception and understanding of reasonable assurance varies significantly amongst different ranks of audit professionals (Law) and it is widely argued that audit cannot provide complete guarantees (Pickett). The audit function is split between internal and external audit. Internal audit is Both internal and external auditors are responsible for ensuring that the financial information prepared by companies’ accountant is in fact in compliance with the accounting standards set out by the regulatory bodies and accounting