Self-review threats also present threats to independence while advocacy threats may present unbiased opinions on the financial position of the firm. Intimidation threats such as coercion the owners of the firm will hinder the independence of the auditor. Auditor’s independence must be about integrity, objectivity, and skepticism (Basu, 2009). The auditor is expected to monitor the integrity of the financial statements, review the internal financial controls, review the effectiveness of the internal audit department, and provide non-audit services while considering the ethical guidelines concerning the auditor’s work. Rotation of audit staff and partners will safeguard the familiarity threat and minimize self-interest threats to independence (Flood, 2012). In order to maintain independence, the auditors are required by law o maintain integrity, competence, objectivity, performance, and courtesy. The auditor must safeguard himself or herself from self-interest threats by abstaining from any direct or indirect financial interest in the audit work (Flood, 2012). The auditor should not take any loan, the guarantee of a loan from the client, or engage in undue dependence on the total fees paid by the client. … In this case, the auditor should not be a promoter of the shares or securities of the client and should not act in litigation or solving of disputes with third parties. The auditors must avoid the familiarity threats and observe ethical guidelines that prohibit conflicts of interests such as abstaining from engaging in audit work if the client is a close family member (Adelopo, 2012). The auditor must not accept any hospitality or gifts from the client, the directors or employees of the client (Basu, 2009). Auditors may face intimidation threats such as the threat of replacement due to disagreements on certain accounting principle, dominant personality of senior management, and pressures to reduce the amount of audit work in order to reduce the audit fees.
Issues Related To The Auditor Independence