The scrutinizing profession is surrounded by several struggles. The client house hires the hearer who is supposed to carry on the audit in an independent mode and any factor impairing the hearer independency should be eliminated. The factors which have been analyzed and are considered to impair auditor independency are larger size of audit fees, extended degree of competition among audit houses, longer term of office of an audit house carry throughing the demands of a given client. However, the being of audit commission has been considered to heighten hearer independency and the proviso of NAS and size of audit house has produced assorted consequences.
The survey reveals that bulk of the respondents, that is, both stockholders and hearers are in the sentiment that independency will be safeguarded by the being of an active audit commission, if the bulk members were impartial and non-executive managers as their independent position would neutralize any struggle between direction and the hearer. Furthermore, the audit commission shall acquire the duty for O.K.ing and reexamining audit fees and besides the audit commission study which includes the activities undertaken during the fiscal twelvemonth to guarantee equal internal control must be included in the one-year study.
Provision of non-audit services
Hearers possess market based inducements to remain independent ; however this independency may be impaired when NAS are provided to their clients. However, as analyzed in this survey, NAS should non be disallowed by audit houses. This instance has produced assorted reactions on this subject. The importance of the issue is that forbiding the proviso of NAS by the same hearer does non truly work out the job of corporate failures. The proviso of NAS by hearers should non be wholly banned, instead there is demand for betterment in revelation, administration and transparence every bit far as non-audit fees, processs and policies are concerned. Additionally, the hearers should heighten their moral capacity in the behavior of professional battles with clients. Additionally, there can be a proper segregation of responsibilities between staff that perform audit services and NAS. This segregation of responsibilities should be in the signifier of separate sections or entities, where different spouses and squad provide the two services.
Size of audit house
As described by the empirical grounds, big houses are perceived to supply better quality audit comparison to little houses. Large houses have greater resources, proficient cognition and planetary range allows them to cover with clients more objectively without the fright of expiration. In fact, big house & A ; acirc ; ˆ™s hearers may exhibit higher degrees of ethical logical thinking ( Tsui and Gul, 1996 ) , and therefore would be better able to defy direction force per unit area. However, the findings in this survey suggests that bulk of hearers and stockholders sentiments are instead impersonal and some of them disagree that merely big houses can supply better quality audit service. Small houses besides have been able to derive the expertness and fiscal resources to present an independent audit services that lends credibleness and dependability to the information content of the audited fiscal statements.
Auditor term of office
The drawn-out term of office of an audit house has been considered to impair auditor independency because hearers may affect in a friendly relationship with the clients & A ; acirc ; ˆ™ direction therefore doing the hearer to affect with directions jobs and lose professional incredulity. Shorter hearer term of office besides may take to scrutinize hazard as hearers will non derive specific cognition to understand the client & A ; acirc ; ˆ™s concern. Therefore, the Sarbanes-Oxley Act requires that audit spouses can alter client after a lower limit of five old ages known as hearer rotary motion therefore bettering hearer independency.
Competition in the audit services market
In this survey, houses runing in an intensely competitory environment have been considered to hold trouble in staying independent as the client house can easy get the services of another hearer. However, extended competition can besides promote hearers to work harder and supply better quality audit service, therefore heightening hearer independency in the long term. Competition can be a challenge to the hearers for them to stay independent.
Size of audit fees
Furthermore, the greater size of audit fees obtained by audit house from the client company has been considered the most of import to impair auditor independency in this survey. The audit house will non be able to supply a dependable and independent audit due to a greater sum of audit fees received by the client company. Therefore, audit fees should be reviewed by the independent organic structure, that is, audit commission and the audit house should avoid high audit fees ( in relation to the entire % of audit gross ) as this may impact the unity of hearers.
It was besides observed that bing Torahs need to be reviewed to go relevant in the prevailing concern universe. In add-on, bing ethical codifications and Torahs need to be reviewed to turn to the modern-day challenges of breeding greater degree of assurance in fiscal coverage and auditing. Accounting criterions and Auditing and Assurance have a good consequence on hearer & A ; acirc ; ˆ™s independency by ordering precise intervention and audit process to be followed under peculiar fortunes. Both company direction and hearers would recognize that any other audit house would hold to stay by the same criterions and make similar decisions.
Another internationally accepted norm is peer reappraisal which is basically a quality control process designed to guarantee that overall quality of audit is maintained throughout the profession. Under this system, audit working documents of a house are reviewed either by a panel of experts set up by the professional institute or by another independent audit house.
Ethical motives besides plays an of import in the auditing profession. If the hearer is honorable and straightforward in his professional work and does non let bias to overrule his objectiveness. Furthermore, he ever maintains an impartial attitude and frees himself from any involvement which is incompatible with his unity and objectiveness. Such an hearer will ever supply an independent and dependable audit service.
5.3 Areas for farther research
This survey is non complete because it takes into consideration merely six factors ; nevertheless, there are other factors such as gifts, client fiscal involvement, the nature of struggle issue and other factors which can be analyzed. Additionally, the menaces which are Self-interest menace, Familiarity menace, Intimidation menace, Self-review menace and Advocacy menace impacting hearer independency besides can be reviewed.