Assignment 1 T2 2013
Student Name: Yameng Guo (Maggie)
Danjun Chen (Juns)
Student ID : 212101409
Due date: 28th August 2013
Australia has professional requirements and comprehensive legislative on auditor independence. Auditor independence requirements are set out in the Corporations Act 2001, which required the auditor must satisfy these entities is influenced by the behavior of the audit requirements, Australian Auditing Standards (ASA 220) which refers to quality control for audits of historical financial information, and the professional standards in June 2006 and also in the guidance issued by the accounting professional bodies in May 2006. According to the Securities and Exchange Commission, the independence of the audit can be defined as a reference for the internal or external auditor independence from political parties might have a financial interest in the business of the auditors. ‘The Corporations Act contains specific auditor independence requirements. These requirements only address financial, business and employment relationships with entities being audited and do not address non-audit services’ (The treasury, 2011). Audit independence has great significance in the auditing work. Independence is the essential characteristics of the audit; also it is the necessary condition to ensure the audit performance quality. Independence is the principle of objectivity and impartiality, and also is an indispensable part of the accountants as their key responsibility. It seems that if loss of independence, then the audit of social functions cannot be achieved and it will reduce the confidence of public for the audit results at the same time. Under the Corporate Act, the all public companies, entities and large proprietary companies need to prepared the financial reports and audited by comply with the audit independent requirement. Although the audit independence of the legal system is comprehensive in Australia, but there are still some factors around the auditing independent problem need to be improved. There are three factors will affecting the audit independence. In the first place, some of the auditors lack of the professional ethics, they are easy to reduce the auditing quality, in order to get more self-interests. In the second place, the marketing environment will also impact the audit independent. In the face of incentive competition, some auditing company choice lower price to provide the auditing performance, therefore, auditors in order to reduce the working costs, they decide to reduce the auditing quality. And the unreasonable company governance structure will also impact the audit independence. Because of the company management structure not perfect, the board of directors of the company might interfere with the auditing performance, and cause the auditor cannot obey the independence requirement when they are working. In order to improve the auditing performance in the future, especially for the independent requirement, there are some changes should be considered. It should be from two aspects to improve the auditing independence. Company need to improve auditing performance from both internal and external aspects to ensure the independence of the auditing. The external aspect means the external environment, like marketing circumstances, mainly from the institutional support for independence, there are three ways can be improved, firstly to strengthen the construction of the audit system to improve the audit independence. Secondly, strengthen the construction of independent consciousness to improve the audit independence. Thirdly, companies need to prefect the corporate governance structure in order to improve auditing independent. The internal aspect refers to improve the auditors’ professional education and comply with the accounting professional ethics, strengthen the follow-up...
Please join StudyMode to read the full document