Page 50 - DCOM204_AUDITING_THEORY

Auditing Theory

Notes impaired independence), perfect independence (despite impaired integrity), or some adequate
combination of reasonable independence and integrity.”
As explained earlier, the current official definition of independence at the individual auditor
level equates independence in fact with integrity and objectivity. At the individual level, no
significant purpose is served by trying to parse integrity, objectivity, and independence. If the
auditor knowingly gives an unqualified opinion on financial statements that are materially and
intentionally misstated, whether the cause is intellectual dishonesty, bias favoring the client’s
management or some other cause of lack of impartiality is unimportant and usually not
determinable with any degree of certainty.

Did u know? The historical reason for the prohibitions against a direct financial interest in
the client and against serving the client in the capacity of management or employee has
been a quest for external signs by which a lack of independence might be recognized.
Because members not in public practice could not meet these stringent requirements, a
separate rule on integrity and objectivity was adopted and made applicable to all AICPA
members. This occurred in the 1973 code. However, the existence of two rules in the code
does not mean that the qualities of integrity and objectivity should be viewed separately
from the quality of independence at the individual public auditor level.

3.2.4 The Independence of Auditors as a Profession must be Preserved

The interests, relationships, and transactions that create a presumption of lack of independence
were adopted into existing requirements because of value judgments made about their potential
effect at both the practitioner and profession level. The longevity of those requirements should
not deter a searching reexamination of the underlying value judgments. However, any conceptual
framework worthy of the profession’s heritage cannot ignore the importance of the public’s
perception of auditors as a professional group. To do so would risk far more than reverence for
that heritage.

Self Assessment

Fill in the blanks:

1. Audit independence equates the term with an attitude and approach of objectivity by
........................ and integrity by.....................

2. Financial statements are often audited by .............................. for the purpose of enhancing
confidence in their reliability.

3. .................... is an essential auditing standard because it added justified credibility to financial
statements.
3.3 Duties and Powers of the Comptroller and Auditor-General of

India

The duties and powers of the Comptroller and Auditor-General of India are enshrined in Chapter
V of Part V of the Constitution of India in Articles 148 to 151 and elaborated under CAG’s
(Duties, Powers and Conditions of Service) Act, 1971.

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