Comment on the statement that "Independence is not easily achieved where an auditor is hired, paid, and fired by the same corporate managers whose activities are the subject of the audit." Can you think of a way around this dilemma?

Question

Business

Yuliana Vincent

15 March, 19:20

Comment on the statement that "Independence is not easily achieved where an auditor is hired, paid, and fired by the same corporate managers whose activities are the subject of the audit." Can you think of a way around this dilemma?

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Answers (1)

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Santos Vang · Answer 1

Independence can be achieved by reporting to Board or its Audit Committee.

Explanation:

Independence of an auditor is key element in performance of audits. Reporting to the management whose activities are subject to audit creates threats to the independence of the auditor. As per the code of corporate governance, auditors should be reporting to the Board or its Audit Committee.