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Declaration Of Independence And Auditing

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Auditor independence includes both independence of the internal auditor and the external auditor, and it requires both internal and external auditors not to have any financial relationships with the company and provide fair and reliable services. Auditor independence can bring various values to the firms. For example, independence of auditor can enhance credibility and accuracy of the financial reports. General public will have no worries on buying stocks from the company. More importantly, investors can trust the financial statements released by the companies. Auditor independence can protect long-term shareholders’ values, monitor clients’ financial affairs, and safeguard clients’ assets. Auditors cannot meet the public auditing standards …show more content…

This rule outlines all the non-auditing services that are prohibited for auditors to provide to their issuers. Additionally, public accounting firm need to be pre-approved by audit committee of the issuer if it needs to provide non-audit services that are not prohibited. This rule was intended to restrict the number of services an accounting firm can perform for a particular issuer, so auditors can work on their auditing jobs honestly and concentratively without being disrupted by other work in the firm. Also, if the same auditor is bookkeeping and auditing the same accounting records, it could be really easy for that auditor to misstatement the statement without being noticed. The rule helps to enhance auditor independence and monitor auditors’ behaviors by eliminating this type of fraud. On the other hand, company needs to spend time and money to find another accounting firm to help it to perform non-auditing services. If auditors are doing both auditing and non-auditing for the same issuer, they could be more efficient in doing their jobs independently. As a result of the rule, many accounting firms that are currently providing auditing services for issuers would lose a way to earn more money since they are no longer allowed to perform some non-auditing services to these issuers. In addition, because companies will need to provide their confidential information to additional accounting firms that are providing non-auditing services, the possibility for information leakage to happen will increase. We believe that the rule have some effects in encouraging auditors to act properly by controlling auditors’ power over the issuers’ financial statement and accounting records, but the influence is limited. The fraud could still happen in auditing areas and non-auditing areas respectively. The costs of the rule

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