Independence is the basis of the accounting profession and one of its most cherished assets. Robert Mednick, Chair, American Institute of Certified Public Accountants ( AICPA ) Board of Directors, 1997.
Audited accounts serve a cardinal economic intent and play an indispensable function in functioning the public involvement to strengthen answerability and increase assurance in fiscal coverage. As audits help heighten economic prosperity it should be carried out by person who is wholly independent with the house. The hearer is the independent nexus between direction and those who rely on the fiscal statements for the decision-making. In that function, the hearer assesses the judgements made by direction in using criterions for the presentation of the fiscal information.
Auditor independency from the point of position of board of managers is considered critical to stakeholders as it acts as a cardinal factor in assisting to supply audit quality. The hearers present an impartial study to the stakeholders on the certainty and equity of the fiscal statements which are set up by the board of managers or direction. The UK audit as a consequence plays an indispensable stewardship function. Limited companies are owned by stockholders but managed by managers who report to the stockholders and the hearers act as a watchdog to see whether the managers show a true & A ; just position of the concern while describing to stockholders.
However, as a consequence of the separation of ownership and ordinance, the troubles with information dissymmetries and differing motivations may take to struggles in the shareholder-director relationship. Normally, as stockholders have limited entree to information, they believe that they are non acquiring accurate information they require to do informed determinations about the fiscal statements is biased. Therefore, stockholders are non likely to swear managers and in such instance the benefits of an audit in keeping assurance and reinforcing trust are likely to be perceived as outweighing the costs. The independency between managers and hearers is the footing of the profession. We shall see in this survey about the factors impacting this really independency.
In order to keep independency and nonpartisanship, hearers should ever be witting of menaces and use appropriate precautions where necessary. Repute is considered to be a cardinal factor in increasing assurance and hearer independency is an of import quality that stockholders search for. Hearers are likely to keep their independency to safeguard their repute and through which help them retain and win audits.
Independence has both the component of Legal and Ethical demand. Legal demand in the sense that it is laid out in the Companies Act 2001 under Section 198, who can be an hearer and who ca n’t. In fact Companies Act 2001 attempts to convey a professional farness of the hearer with his client and besides to procure hearer ‘s independency by unfiting certain people from eligibility for assignment and by commanding his remotion or surrender.
Legal demands in relation to auditor
The general intent of jurisprudence is to procure that lone individuals can be appointed as hearers who are good qualified, decently supervised and can transport out the audits decently and with unity and proper independency.
Section 198 ( 1 ) of the companies ACT 2001 provides that a individual shall non be appointed or move as hearer of a company other than a little private company unless the individual is-
a member of-
the Institute Accountants in England and Wales ;
the Association of Chartered Certified Accountants ;
the Institute of Chartered Accountants of Ireland ;
the Institute of Chartered Accountants of India ; or
the South African Institute of Chartered Accountants ;
Section 198 ( 2 ) of the companies ACT 2001 holds that a individual will be ineligible for assignment or to move as an hearer of a company if he or she is
( a ) a manager or employee of the company ;
( B ) a individual who is a spouse, or in the employment, of a manager or employee of the company ;
( degree Celsius ) a murderer or a individual who is a receiving system in regard of the belongings of the company ;
( vitamin D ) a organic structure corporate ;
( vitamin E ) a individual who is non ordinarily occupant in Mauritius ;
( degree Fahrenheit ) a individual who is indebted in an sum transcending 10,000 rupees
to the company, or to a related company unless the debt is in the ordinary class of concern ; or
( g ) a individual who, by virtuousness of paragraph ( a ) or ( B ) , may non be appointed or move as hearer of a related company.
Aims of the survey
The intent of the independent audit procedure is to hold a 3rd party examine an organisation ‘s fiscal statements to see if they are accurate and dependable. Therefore, hearer independency is indispensable to that part. It is non merely of great importance that hearers should keep their independency but besides they should supply high quality scrutinizing. Therefore, without hearer independency, the credibleness and dependability of fiscal information will be reduced and may do job to the scrutinizing profession.
The damage of hearer independency is the chief cause of many corporate prostrations and dirts ( illustration Enron and WorldCom ) and this have cast a shadow of uncertainty over the public presentation of the hearers.
The rule aim of this research seeks to place the possible factors which could impact hearer independency. Furthermore, these factors will be analysed both positively and negatively that is, whether they will heighten or impair auditor independency when giving an audit sentiment on fiscal statements. Additionally, a few suggestions will be put frontward how the factors will lend towards a better apprehension on the ways to increase assurance in fiscal coverage and credibleness of the scrutinizing profession. The hearer ‘s and stockholders ‘ perceptual experiences will be considered in Mauritius as they are preparers and users of fiscal statements.
The benefits of this survey is that the factors which largely put force per unit area on the hearer independency will be identified and plausible solutions will be sought from faculty members and professionals about how these issue can be addressed and resolved.
Organization of the survey
This survey is organized into six chapters. Chapter 2 comprises a elaborate literature reappraisal environing both the theoretical and empirical positions sing the stock market development and economic growing. Chapter 3 provides an overview of the single SADC stock exchanges. Chapter 4 presents the method and variables employed in the survey. The analysis and consequences of the survey are presented in Chapter 5. Chapter 6 concludes the survey while besides foregrounding its restrictions and countries for farther research.