The Role of Safeguards in Strengthening Independence Essay - 1

The Role of Safeguards in Strengthening Independence - Essay Example spot this is so, manipulation of the auditing bodies is completely inevitable as these bodies argon appointed and paid by the client. However, it is possible to optimize emancipation by neutralizing the threats that put independence at stake. Some threats that affect independence include self interest threats, self review threat, management threats, advocacy threats, familiarity threats and intimidation threats. In this light, designing and deploying effective safeguards willing increase the level of attendant independence to and ensure integrity in their work. This can be achieved through the mandatory auditor rotation, peer review, independent auditor appointing, free scope and formulation of effective audit committees.Mandatory Auditor RotationMandatory auditor rotation is the act of compelling all monetary organizations to adopt and engage a different auditor each financial year to avoid the preference of a single auditor. Often, the management prefers to hire the analogous auditors every year to ensure that they are able to manipulate them to provide audit results that conform to the will of the management (Chung 2004, p. 8). This inclination of the audit results to the managements opinion undermines independence and reduces the integrity of the end results. In this view, mandatory auditor rotation will ensure that the familiarity and the management threats are suppressed and the audit bodies have a divulge chance to provide results that reflects the true image of the organization (Chung 2004, p. 8). According to Forbes (2013, Para. 2), the US House of Representatives voted for mandatory auditor rotation as one way of setting the audit bodies free from manipulation. Peer Review In a peer review audit, after the principal auditor completes the audit process, other qualified originals appreciate the work to verify its integrity and ensure that the financial statements are in accord ance with those of the financial investors. This is a quality assurance process that aims at step-down any errors that may have occurred during the initial accounting process. In addition, this helps to reduce any form of data manipulation that may have been done on purpose under the influence of any independence threat (Allen and Siegel, 2002). Although this process may be quite expensive, it ensures that independence threats are neutralized and more credible results are attained. Independent Auditor appointing and free setting In this process, the role of appointing a professional auditor is withdrawn from the financial investor or client and dedicated to another(prenominal) body. The International Organization of the security commission (2002) states that the role of client in appointing the auditor provides a weakness in the independence of the audit results. Often, organizations will fill those auditors that they feel are easy to manipulate or threaten to ensure that they ar e able to cover up or pursue personal interests by imposing their own opinions on these professionals. To reduce this threat, an independent appointing body should be constituted to ensure that familiarity threats are eliminated by selecting professionals that are least affiliated to the firms. For instance, the government agencies can be chosen to appoint audit bodies for financial investors. Alternatively, shareholder committees should be formulated to take up this role of appointing a credible professional audit body that can provide credible results. In essence, giving this role to an