independence

    Subdecks (1)

    Cards (20)

    • Independence of mind
      ability to provide an unbiased opinion without external influence
    • Independence of appearance
      avoidance of significant facts that could lead a reasonable third party to doubt the auditor's integrity, objectivity, or professional skepticism.
    • Professional skepticism
      An attitude that includes a questioning mind and a critical assessment of audit evidence, especially in areas like fair value estimates, impairment provisions, and complex accounting areas.
    • Fundamental ethical principles
      • Integrity
      • Objectivity
      • professional competence
      • professional behavior
      • confidentiality
    • Types of threats to auditor independence
      • Self-interest
      • Self-review
      • Management threat
      • Advocacy
      • Familiarity or trust
      • Intimidation
    • examples of threats to auditor independence
      • Non-audit fees
      • Undue dependence
      • Long tenure
      • Blurring of lines between auditor and client
    • Safeguards to counter threats
      • Educational, training & experience requirements
      • Professional standards
      • Regulations
      • External review
      • Firm-wide, engagement specific safeguards, including audit partners rotation, and external quality reviews
    • Fee Dependence
      When total fees from client are "large proportion" of firm's fees, creates self-interest/intimidation threat. Similarly, for engagement partner or office of firm. Significance of threat depends on various factors, e.g. whether firm is well-established or new/growing. Safeguards: reducing dependency (growth in fee base), not undertaking engagement at all. "Large proportion of fees" where expect to regularly exceed: 10% for a PIE, 15% for a non-listed entities. Consult with Ethics Partner where 5-10% for PIE, and review threats.
    • Prohibited Non-audit Services
      • Bookkeeping and preparing accounting records and financial statements
      • Designing and implementing internal control or risk management procedures related to the preparation and/or control of financial information
      • Valuation services, providing fairness opinions or contribution-in-kind reports
      • Actuarial services
      • Internal audit services
      • Management functions or human resources
      • Broker or dealer, investment adviser or investment banking services
      • Legal services, with respect to the provision of general counsel
      • Services that involve playing any part in the management or decision-making of the audited entity
    • Auditor Independence
      • independence of mind
      • independence of appearance
    • Ensuring Auditors independence (the UK approach)
      self-regulation by professional bodies
      compliance with ethical standards
      corporate governance rules, including audit committee assessments of auditor independence and effectiveness.
    • specific safeguards:
      financial relationship restrictions
      disclosing personal relationships
      partner rotation policies
      limiting fee dependence
      limiting/prohibiting non-audit services
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