AUDITOR INDEPENDENCE

THE CONCEPT AUDITOR INDEPENDENCE

No ethical concepts is more important to an independents auditors services and the image he projects that independence; hence in Professor Edwards Stamp's words "an Auditor is virtually useless as an auditor if he is not independent" Professional independence is a concept fundamental to the accountancy profession. Essentially, it is an attitude of mind characterized 'w integrity and an objective approach to professional work. The most important matter affecting the credibility of the auditor and hence of the audit report is that independence. To provide this credibility auditor must be honest and be seen to be honest, unbiased objective in giving his opinion. He is expected to consider the interest of third party who used public financial statements when he issues his audit reports. There is another aspect of independence which relate to the professional accountant is unlikely to associate him or his name with document/ which is known to be false or misleading.

Users of account who do not necessarily know the auditor accept his report mainly on the faith in the entire accounting profession.

The kinds of relationship or instances that may erode or impair that independence of an auditor are as follows.

1.     FEES: the auditor independence could be eroded if a substantial portion of his income is derived by one client or group of connected clients. In this position, the auditor finds it difficult to be objective in relation to the client affairs.

2.     RISK: the risk of being harmed because of discovering fraud may affect the auditor's independence. We had many cases of auditors being threatened or being killed during or after their assignment.

3.     PROTECTING POLITICAL INTEREST: where auditor geared his mind towards protecting the interest member of a political, party his independence would be impaired.

4.     SHAREHOLDING IN CLIENT COMPANIES: It may be difficult for an audit firm to be objective partners in the firms or their spouses have shares in the client company.

5.     OTHER FINANCIAL INVOLVEMENT WITH THE CLIENT: Financial involvement with client may affect the auditor's objectivity. A circumstance where an audit practice make a loan to a client or guarantee the client borrowing or accept a loan from a client could seriously or adversely erode the auditor's independence. This will not affect normal banking overdraft.

6.     GIFTS, GOODS AND SERVICES: Upon acceptance of goods and services from a client may jeopardized - independence on the same terms as those available to other persons. Acceptance of hospitality could affect his independence.

7.     PERSONAL RELATIONSHIP: personal relationship could jeopardize objective if an auditor has a mutual business interest with an officer or employee of the client or has an interest in joint venture with a client that could affect his judgment. The same situation could happen in case of close friendship or relationship by blood or manager.

8.     POVERTY: The mere fact that an auditor is poor could also affect his credibility or independence.

9.     PRESSURE: pressure from either the shareholder or directors may tend to affect his independence.

SOLUTION TO EROSION OF AUDITOR INDEPENDENCE

The auditor independence would not be affected if he adhered to his professional ethics. In line with his professional ethics, he must not involve himself with those factors that could impair his independence.