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Corporate Audit: Bryan Heng Keng Yong (Scsj-0013285) Jeff Lim Wei Zhen (Scsj-0013274)

This document discusses auditor independence and the effects of non-audit services on independence. It notes that auditor independence refers to independence from parties with a financial interest in the audited business. While non-audit services like tax and advisory work can enhance auditor knowledge, they may also threaten independence in appearance or due to self-interest. The document examines arguments both for and against restrictions on non-audit services to protect independence.

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林威政
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49 views16 pages

Corporate Audit: Bryan Heng Keng Yong (Scsj-0013285) Jeff Lim Wei Zhen (Scsj-0013274)

This document discusses auditor independence and the effects of non-audit services on independence. It notes that auditor independence refers to independence from parties with a financial interest in the audited business. While non-audit services like tax and advisory work can enhance auditor knowledge, they may also threaten independence in appearance or due to self-interest. The document examines arguments both for and against restrictions on non-audit services to protect independence.

Uploaded by

林威政
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CORPORATE AUDIT

BRYAN HENG KENG YONG (SCSJ-0013285)


JEFF LIM WEI ZHEN (SCSJ-0013274)

Introduction

Audit Independence

Refers to the independence of auditors from parties


that may have a financial interest in the business being
audited

Auditor Independence

Integrity
Objective
Public

Manner

Confidence

Reliability

Non-Audit Services

Tax Services

Preparing financial statements

Advice on systems of internal control

Effects on Auditor Independence

Non-Audit Services Effect on Independence in


Appearance

Professionals

General Public

Effects on Auditor Independence

Non-Audit Services Effect on Audit Quality

Increases audit quality

Quality benefits outweigh the independence


concerns

Effects on Auditor Independence

Non-Audit Services Effect on Audit Efficiency

Beneficial in Audit Risk Assestment

According to Audit Risk Model, this would allow


auditor to better plan nature of tests, resulting in a
more effective audit

Effects on Auditor Independence

Non-Audit Services Effect on Independence of Mind

Benefits of Knowledge Transfer

Benefits provided to clients

Tax Services

Professional advice on how to improve business

Save Cost

Minimize threats that affect


Independence

Modifying the selection process

Limitation of Non-Audit Services

Mandatory Rotation Rules

Better Disclosure

Corporate Governance Mechanisms

Question (B)- Allegations

Audit firms are charging low audit fees in order to


obtain lucrative non-audit work

Breach of integrity and independence

Should be done ethically

Question (B)- Allegations

With large fees from non-audit work, auditors will be


reluctant to qualify their audit report because of risk of
losing both the audit and non-audit fees

Self-Interest Threat

Should limit non-audit services

Question (B)- Allegations

Auditors reluctance to qualify their audit report


compromises their independence

Sake of personal gain

Argument against general prohibition

Knowledge

Skills

Quality of Recruits

Dependence on Clients

Conclusion

Auditors should be allowed to provide non-audit


services

No correlation between non-audit services and audit


failure

Separation of non-audit services will likely increase


cost and reduce quality of audit

THANK YOU

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