The Importance of Being Independent
Question 1
There is a need to disclose the elements of the relations shared between the uncle and the new member of the Company J audit team. In essence, the information allows the dissemination of possible concerns arising along perspectives such as the independence of an auditor. Arguably, the relationship shared by the controller and the new member of the audit team may lead to declining public confidence following doubts cast on the independence of the auditor’s report regarding the opinion of the firm. In some cases, the existence of such a conflict may affect the authority associated with both the firm and the auditing team. Auditors, being the custodians of public confidence in accounting, have their opinions anchored on the independence of their actions. Acceptable audits involve both the impression of the involved firms and the perception shared by the public. In the case of Company J, the existence of a conflicting opinion regarding the relationship between the controller and the auditor may lead to questionable impressions regarding independence (Irwin 2012). Therefore, making disclosures about the nature of shared relationships allows the firm to adopt a reliable position regarding the participation of the auditing team in verifying the financial records.
Question 2
The professional practice adheres to the guidance of ethical obligations. Their occurrence tends to relate across professions. Professions such as law and medicine share similar moral commitments with their accounting counterparts. Ideally, lawyers would refrain from representing both parties in a divorce case due to the associated conflict of interest. Equally, doctors would not participate in an operation exercise on a family member. A further reflection of professionals, such as therapy, assists in reflecting on the implication of conflict of interests. Therapists refrain from treating best friend’s spouses (Irwin 2012). In either case, the existence of an unethical conflict of interest stemming from ethical obligations challenges the prospect of respective professionals participating in the suggested activities. Arguably, the observations retaliate against the impression that professional practice is a product of restricted entities.
Question 3
The need to comply with the established independence policies and applicable rules stems from the desire to meet the expectations of the public. There exists an expectation from the public that accountants must manifest adequate knowledge of their subject and detest possible incidents that conflict with their ethical obligation. Participating in a structured compliance system that guides the policies and regulations, as well as the conduct and character of the involved professionals, assures the public of the efficiency and reliability of their decision (Irwin 2012). Besides, the input of trust plays a central role in assuring the public of confidence in the accounting system and in averting possible conflicts or crises in the markets. Ensuring the participants in the accounting industry promote adherence to commonly accepted policies and regulations is central to ensuring improved public trust.
Question 4
The impression of threats associated with the identified five areas of independence offers equal implications to the participating accounting professionals. Identifying their consequence along with perceptions such as the weight of their authority impairs the autonomy of their suggestion. A successful auditing process fetches power on the ability of the participants to refrain from compromising their authority. Each of the suggested areas of independence threatens the possibility of attaining the desired sense of autonomy. Breaching the five areas of independence has an implication for the performance of the involved auditors and points to a possible compromise of ethical integrity (Irwin 2012). Participants from the accounting sector would be inviting possible damages to their public trust levels by inviting doubts about their independence arising from their interactions with restricted entities. Also, the breach of the five areas of autonomy, namely, financial interests, business relationships, the scope of auditors’ services, employment relationship, and fee agreement, amounts to a substantial conflict in committing to professional expectations such as protecting the public interest.
References
Irwin, Theresa. “Section I – Independence 101.” YouTube, GiesBusiness, 6 Sept. 2012, www.youtube.com/watch?v=e_cRf3qvONQ.
Irwin, Theresa. “Section II – The public accounting profession.” YouTube, GiesBusiness, 7 Sept. 2012, www.youtube.com/watch?v=cOPz22e_28I.
Irwin, Theresa. “Section III – Independence at Work.” YouTube, GiesBusiness, 7 Sept. 2012, youtu.be/XCygEhsWPWs.
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Question 
Background:
The Deloitte Foundation, in conjunction with the University of Illinois Center for Professional Responsibility in Business and Society, has created Auditor Independence Education Materials to help students learn about core concepts, real-world applications, and prevailing rules related to auditor independence.
The Importance of Being Independent
Required:
Please watch the FULL video (3 sections) titled “The Importance of Being Independent,” which focuses on the public interest, professional skepticism, financial statements users, and independence in fact and appearance.
- “Section 1 – Independence 101” (approx. 12 minutes)
- “Section II – The Public Accounting Profession” (approx. 5 minutes)
- “Section III – Independence at Work” (approx. 10 minutes)
The video can be found at https://business.illinois.edu/responsibility/course-materials/for-students/. After watching the video, please respond to the following questions.
- Your uncle is employed as the controller of Company J, an audit client of your firm. You are asked to serve on the Company J audit team. You are pretty sure that the independence rules do not prohibit you from serving on the audit team because, technically, your uncle is not a “close relative.” You have a close relationship with your uncle and see him on a regular basis. Should you disclose this relationship to your firm? Why?
- What do other professions, such as law or medicine, have in common with the accounting profession?
- All professionals in public accounting firms, whether they provide audit, tax, or consulting services, should comply with the accounting firm’s independence policies and applicable independence rules. Why do you think this is?
- Do you consider any of the “five areas of independence,” described in the Video a greater threat to independence than any of the other areas? Why?
Formatting:
As indicated in the syllabus, your response should not exceed 2 single-spaced pages. Please review your syllabus for all other formatting and submission guidelines. The due date for this project is also indicated on your syllabus.