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Compose a 1750 words assignment on auditor independence. Needs to be plagiarism free!
Compose a 1750 words assignment on auditor independence. Needs to be plagiarism free! Power (1997, 4) defines independent auditing as the ‘independent examination of and expression of opinion on, the financial statements of an enterprise’. In another definition, an independent auditor is ‘a Certified Public Accountant who provides a company with an accountant’s opinion, but who is not otherwise affiliated with the company’ (Investorwords.com).
While agreeing auditor independence is important, former President of the Institute of Chartered Accountants in England & Wales {ICAEW} Peter Wyman opined it is not ‘all-important’ but superceded by the audit quality and the knowledge/experience of auditors (Wyman, 2004). This observation of an imminent personality like Wyman in 2004 reflects the general perception of auditor integrity that existed in the world in general and in the UK in particular before 2001. Lehman (2006, 33) found that the compliance aspect - assurance that auditors fulfill their fiduciary duty to investors was largely taken for granted. In April 1980, the ‘Accountants Magazine’ reported that UK auditors interpreted any focus on auditor independence as a threat to their non-audit services (Hopwood et al., 1994, 276).
Collegenews.org (2005) recalled US Rubber Importer Fred Stern & Co. went bankrupt in 1925 after providing fake information about assets worth £700,000 to get investment capital. BBc.co.uk (1991) cited the Bank of Credit and Commerce International {BCCI} scandal in 1991 involving a £5.6 billion deficit, making the Bank of England close all its UK branches over charges of fraud. Perry (2002) reported that when FTSE 100 Company Polly Peck International collapsed in 1990 with borrowings of £522 million, its auditor Stoy Hayward had to pay a fine of £75,000 plus £250,000 in costs.
No pre-2001 scandal was as massive as the Enron disaster that Pbs.org (2002) recalls .involving filing for the biggest Chapter 11 bankruptcy in US history on December 4, 2001. . Beams (2002) contends that it was due to rogue trading, deliberate concealment of debts and other financial irregularities done by Enron in connivance with auditor Arthur Andersen LLP. .
