Auditor Of The House Of Representative About The Independence Of Auditors

1066 Words Nov 6th, 2015 null Page
A discussion to the question asked by Congressman Richard Shelby of the House of Representative about the independence of auditors establishing long-term personal and professional relationship with companies by auditing those companies. Respectively companies that retain the same auditors for long period of time may perhaps question their independence and objectivity. The failure of financial reporting at Enron, WorldCom, Lemon Bother and others, led to financial reporting reforms. Audit firm rotation is suggested to be a way of improving audit quality, hence limiting the number of years to five an auditor can audit the same firm. However the proposed solution introduces both benefits and costs to the audit market. The benefit of audit rotation is there will be fresh look in the company’s financial statement, hence potentially improved audit quality. On the other hand, it is argued that audit rotation could be costly and outweigh the benefits and furthermore loss of client knowledge if the auditors are changed frequently, as a result they may put cost before quality.

Audit is an assurance service that is provided by the auditors. Companies that audit their accounts must present true and fair view of its financial statements and information provided the must be reliable and trusted. Therefore the auditors form an opinion on the financial statements of a company based on the evaluation of the conclusion drawn and hence express their opinion on written report and the reason…

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