The Role of the Auditor and their Independence Requirements
Auditing refers to a systematic and independent examination of books, accounts, documents and vouchers of an institution to ascertain whether or not the financial statements present a true and fair view of the concern. The emerging audit failure and fraud have led to the questioning of the value of audit independence. Though an audit profession is recognized by many stakeholders, auditing plays an important role in financial reporting processes. The value of independent audit is essential in the management of a company and other sectors that require auditing. Furthermore, the value of the independent audit is determined by the absence of fraud and failures of the business on the completion of the audit. Issues concerning audit quality tend to occur in the audit framework failures without recognition that many audits vary with time. Independent auditing is essential in reporting a true value of a company’s assets and net worth.
This enables the investors to have confidence in the management of the company, thus forming an essential part in decision making. It is for these reasons that the accounting and auditing bodies such as International Standards on Auditing (ISA), International Standard on Quality Control (ISQC) and the IAASB have come up with requirements to tame lack of auditing independence. Furthermore, the IAASB has revised some requirements based on independent reporting following cases of misreporting among companies’ auditors.
Additionally, each key player is responsible for financial reporting and governance system. Independent auditing continues to improve on performance, essential in efficient execution of quality audits leading to the reliability of a timely and useful financial information. Therefore, auditors should be put to provide assurance on financial reporting in any format. A movement towards a set of global standards concerning accounting, auditing and independence the value of auditing will continue to play a critical influence on investors’ decision making processes.
The main purpose of an audit is to give an independent opinion to the investors of a company on the facts and fairness of financial statements on whether they have been prepared according to the Company’s Act. Additionally, auditors are required to report to the investors on the company laws requirements on whether accounting records have not been well-kept or not. Auditing verifies the availability of a company’s assets and recommends conditions for the assets’ protection. To achieve this, auditors are required to work alongside line managers in reviewing a firm’s operations and report their findings. Therefore, an auditor must be well versed in the company’s strategic objectives and the industry in which the company operates. This will enable them to understand how the firm fits into the whole industry (Pickett, 2005).
In the process of protecting the assets, auditing ensures a provision of a true value of the assets and provide proper control to avoid theft of the company’s assets. Auditing also evaluates the sufficiency of the company’s systems of internal controls. It is tasked with finding out loopholes were used in committing frauds and recommended …