Issues And Features Of The Audit Process Term Paper

Issues And Features Of The Audit Process - Term Paper ExampleIndependent auditing is encouraged in organizations in order to protect the potential investors and shareholders from any misrepresentation of the financial statement or fraudulent claims that are often made in the mankind companies (Gray and Manson, 2008 98). Moreover, after the Sarbanes-Oxley coif (SOX) introduced in 2002, the appointment of the independent auditor becomes mandatory for improving the auditing and accounting procedure. Many organizations are seen to appoint independent auditors, who are manifest public accountants, responsible for checking their business transactions and financial records, yet not being affiliated with it (Singleton, T.W., and Singleton, A.J., 2010 13). However, independent auditing is seen to suffer from a large number of threats such as intimidation threat, trust or familiarity threat, advocacy threat, management threat, self-review threat and self-interest threat. Therefore, safegua rding the independence of the auditors becomes a major area of concern. This report focuses on the safeguards for the independence of auditors. Safeguards to extradite the Independence of the Auditors On recognizing the significant threat of independence in the auditing process, the organization must decide on some safeguards in order to save the auditors. Some of the approaches that are considered by organizations are as follows Mandatory rotation in the auditor In a case where an external auditor is constituent a particular client for many years, they often end up building relationships with their clients, which make them less skeptical about their work than that they would have been otherwise. The SOX Act has made it mandatory for the public company, who is the partner-in-charge, to rotate their auditors, at least every five years. However, for non-public companies, there are no such requirements for rotation of auditors.