which of the following reports may be issued only by an accountant who is independent of a client? This is a topic that many people are looking for. cfiva.org is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, cfiva.org would like to introduce to you Auditor Independence. Following along are instructions in the video below:
Lets talk about auditor independence. In the academic literature. And this is something that that academics have you know done research on for years and years and years because the importance of auditor independence.
And one definition is auditor independence. Would be the probability that an auditor will report an error in the financial statements. The probability that they will report.
The error in the financial statements. Given that theyve discovered it so you have to dispute your if you dont discover an error that doesnt mean that youre not independent right that could mean that you didnt conduct a very effective audit. That could just be simple your audit risks that you didnt uncover it because you dont provide absolute assurance.
Because you dont look at 100 of the items or because. A client is just very good at covering it up right. So the fact that you didnt discover an error doesnt mean that youre not independent you violated your independence if you discovered an error and did not report that error then you violated your independence.
But because its your responsibility to to report that error right so thats a pretty standard definition.
So independence is covered under rule. 101. So all of the standards that youre going to talk about in terms of the professional standards.
You must know rule 101. So when i say rule. 101.
It should just be instinctive. You know im talking about independence. Im asking you about independence so im going to tell you independence is an extremely important standard and so its very important that you understand independence right and the rules.
Governing independence. So there are two there are two components of independence independence in fact and independence and appearance and so the standards talk about independence independence in fact. I and but most of the standards are the standards as written a really geared toward independence and appearance and the reason for that is the standards the appearance really deals with whats prohibited whats allowed you know what constitutes a violation of independence.
So for example you have to be independent.
When you are conducting an audit engagement. So if you are assigned to an audit engagement. You have to be independent of that client also you it talks about covered members so not in addition to the auditor right.
There could be members of the auditors family that are also have to you know comply with this rule. 101. In a sense that if the auditor knows that his or her spouse is a cfo at the audit client that auditor should not be on the audit engagement.
Okay so the fact the fact that the spouse is the cfo it means that if that auditors on that audit engagement. The auditor is violated independence. So well talk about covering member.
But the reality of it independence is so important because its important to users or the financial statements. The auditor has to provide the users have to believe or have the perception that auditors are independent. Because if not and under it undercuts their you know their reliance on the financial statements.
So i was going to show you this but .
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