Select one bolded section that interests you and read through it. Summarize what the rules cover. Is there anything missing that you feel should be added? Are there any guidelines that you would eliminate? What would be the biggest challenge an auditor might face following your chosen section? Be sure to respond to at least one of your classmates’ posts with new information about the topic, a clarifying example, and so on.
The Correct Answer and Explanation is:
Sure! Let’s assume the bolded section selected is: Independence and Objectivity
Summary of What the Rules Cover:
The Independence and Objectivity section in auditing ethics rules ensures that auditors perform their duties without bias, conflict of interest, or influence from internal or external sources. This means auditors must be both independent in fact (truly impartial) and independent in appearance (perceived as impartial by outsiders). It prohibits financial or close personal relationships with the client and restricts certain non-audit services that might compromise objectivity.
What Might Be Missing:
While the rules emphasize avoiding financial interests and personal relationships, they could be strengthened by including:
- Social media interactions: Auditors engaging with clients online could raise questions of perceived bias.
- Rotational requirements: Mandatory auditor rotation (e.g., every 5 years) helps prevent over-familiarity but is not always enforced.
- Psychological bias training: Auditors may not recognize unconscious bias; mandatory training could help maintain objectivity.
Guidelines That Could Be Eliminated:
Some overly broad restrictions on minor financial interests—such as holding immaterial investments through a diversified mutual fund—could be reconsidered. These often have little to no real risk of influencing audit judgments and may overly burden auditors without improving objectivity.
Biggest Challenge for Auditors:
The greatest challenge in maintaining independence and objectivity is managing familiarity threats—especially in long-term client relationships. Auditors who work with the same client for many years may develop trust or loyalty that could unconsciously impact judgment. Even without overt bias, the appearance of compromise can damage credibility. Balancing client rapport with professional skepticism is difficult but critical.
Response to a Classmate (Example):
Hi [Classmate Name], great summary! You mentioned independence in terms of financial ties, which is crucial. To add, even small non-audit services like assisting in bookkeeping could threaten independence, as the auditor may be reviewing their own work. For example, if an auditor helps design internal controls and later audits their effectiveness, that’s a self-review threat. These subtle conflicts are why independence must go beyond just financial interest—it’s also about roles and responsibilities.
