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The Beginning of Time

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Submitted By aprallstar
Words 905
Pages 4
Frank Bruno
Auditing
1:00-2:15
Enron Case
Due 2/10/05

1. What is auditor independence and what is its significance to the audit profession? What is the difference between independence in appearance and independence in fact?
Auditor independence involves the auditor and the company being audited. It requires them to maintain separate business and personal relations. This is imperative because personal feelings can hinder the ability of an auditor to perform the required tasks. Expectations and assumptions can result from this as well. It is expected from an auditor that they be independent and unbiased. This is imperative when they are dealing with the financial statements because it is extremely important that they be impartial during the audit, which means that personal relations and former employees with strong relationships with there former employers would not concede to these standards. Independence in appearance is avoiding financial and managerial relationships with clients; this is necessary because this is the only portion that the public can actually see. The general public will only grant social recognition of professional status to auditors when they are perceived as independent. Independence in fact to the contrary from appearance is the ability for an auditor to remain unbiased during an audit of financials. Independence is the first aspect of an audit that the public sees. Although all stages of an audit are of equal importance, it is the independence aspect that can affect the entire audit. By merely assuming management has good internal controls and they are not overstating revenue it is important to rule out personal relationships.

2. In what ways might Andersen’s independence in fact or in appearance might have been affected?
Their independence was compromised in many ways. By them sharing office space as well as

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