Asked by: Octaviano Maximiano
business and finance executive leadership and management

Can a CPA be objective without being independent?

21
It is possible for someone to be independent but not objective, and it is equally possible for someone to be objective without being independent. Standard 1100 states: "The internal audit activity must be independent and internal auditors must be objective in performing their work."


Keeping this in view, what is the difference between independence and objectivity?

In addition to "organizational independence," the Standards also clearly define objectivity. "Objectivity is an unbiased mental attitude that allows internal auditors to perform engagements in such a manner that they believe in their work product and that no quality compromises are made.

Also, would it be possible to be objective when auditing a friend's financial statements? An auditor's independence refers to the independence of the auditor from the parties that are connected to the company or which have a financial interest in the firm. Yes, it is possible to be objective while auditing the financial statements of a friend's company.

Accordingly, what makes an auditor independent?

Auditor independence refers to the independence of the internal auditor or of the external auditor from parties that may have a financial interest in the business being audited. Independence of the internal auditor means independence from parties whose interests might be harmed by the results of an audit.

What does independence mean in accounting?

Independence generally implies one's ability to act with integrity and exercise objectivity and professional skepticism. The AICPA and other rule-making bodies have developed rules that establish and interpret independence requirements for the accounting profession.

Related Question Answers

Xiaolin Biryulev

Professional

What is the major objective of the Iiarf?

Objectives. The Foundation's major objective is to support research and education in internal auditing, thereby enhancing the development of the internal auditing profession. The IIARF accomplishes this by: - Researching pertinent issues and topics.

Aroua Manjrekar

Professional

What are the three parts of the CIA exam?

The CIA exam Part 3 includes four domains focused on business acumen, information security, information technology, and financial management. Part Three is designed to test candidates' knowledge, skills, and abilities particularly as they relate to these core business concepts.

Duha Kesselaar

Professional

How can internal auditors maintain independence?

Internal auditors are independent when they render impartial and unbiased judgment in the conduct of their engagement. To ensure this independence, best practices suggest the CAE should report directly to the audit committee or its equivalent.

Edith Geary

Explainer

How can auditors improve independence?

Further solutions suggested from consultation
  1. Strengthening of audit committees.
  2. Public disclosure of firms' inspections report.
  3. Enhance audit committee report and auditor reporting.
  4. Increase the IRBA penalties.
  5. Provide audit quality indicators to relevant stakeholders.
  6. Strengthen the audit regulator.

Dominika Mayeur

Explainer

What is integrity and objectivity?

01. Rule 102 – Integrity and objectivity. In the performance of any professional service, a member shall maintain objectivity and integrity, shall be free of conflicts of interest, and shall not knowingly misrepresent facts or subordinate his or her judgment to others.

Felton Rivaya

Explainer

Why auditor independence is important?

Independence is one of the most important requirements for audit firms. It's why investors and lenders trust CPAs to provide unbiased opinions about the presentation of a company's financial results. In short, auditors can't provide any services for an audit client that would normally fall to management to complete.

Kunal Woltemate

Pundit

Can a CPA auditor be independent without being objective and can a CPA auditor be objective without being independent?

It is possible for someone to be independent but not objective, and it is equally possible for someone to be objective without being independent. Standard 1100 states: "The internal audit activity must be independent and internal auditors must be objective in performing their work."

Loyd Rohlfing

Pundit

What is auditor independence and objectivity?

Interpretation. Independence is the freedom from conditions that threaten the ability of the internal audit activity to carry out internal audit responsibilities in an unbiased manner. Objectivity requires that internal auditors do not subordinate their judgment on audit matters to others.

Demi Bredow

Pundit

What happens if an auditor is not independent?

The auditor should be independent from the client company, so that the audit opinion will not be influenced by any relationship between them. If this happens, the auditors can no longer be said to be independent and the shareholders cannot rely on their opinion.

Fakhar Yeatman

Pundit

What are the threats to auditor independence?

5.3 Forms of Threats to Auditor Independence
The FEE (1998) and the ISB (2000) (now defunct) identified five categories of threats - self-interest threat, self-review threat, advocacy threat, familiarity threat, and intimidation threat.

Fara Onilov

Pundit

What are the major threats to independence?

They are self-review, advocacy, adverse interest, familiarity, undue influence, financial self-interest, and management participation threats (ET Section 100-1, AICPA, 2011). There are several circumstances and relationships that cause threats to auditor independence.

Carita Hedriche

Teacher

What are the responsibilities of an independent auditor?

An independent auditor either works for a public accounting firm or is self-employed. An auditor examines financial statements and related data, analyzes business operations and processes, and provides recommendations on achieving greater efficiency.

Lora Seoane

Supporter

What is self review threat?

Self review threat
This occurs when an auditor has to review work that they previously performed. For example: if the external auditor prepared the financial statements and then audited them.

Edilene Zarzoso

Supporter

What is a Secrac?

System Engineering Cost Reduction Assistance Contractor.

Stephaine Iruela

Supporter

What is balance sheet audit?

A balance sheet audit is an evaluation of the accuracy of information found in a company's balance sheet. After a balance sheet audit, you can use the analyses to detect irregularities or weaknesses in your company's accounting system.

Elita Saou

Beginner

What is the difference between independence in appearance and independence in fact?

Independence in fact indicates that the auditor possesses an independent mindset when planning and executing an audit, and that the resulting audit report is unbiased. Independence in appearance indicates whether the auditor appears to be independent.

Liya Tarrero

Beginner

What is the meaning of the rule that requires the auditor be independent?

What is the meaning of the rule that requires the auditor be independent? The auditor must be without bias with respect to the client under audit. What services can be offered to public company audit clients under SEC requirements and the Sarbanes-Oxley Act? Tax planning not involving tax shelters.

Teresiano Fontinhas

Beginner

How many years can an auditor audit the same company?

The audit firm tenure for PIEs will be limited to 10 years and the same audit firm can be reappointed for another 14 years in case of joint audits (the company is being audited by more than one audit firm) or for another 10 years in the case of a public tender.