Conflicts of Interest between Auditors and Clients

2117 Words5 Pages

The complete destruction of companies including Arthur Andersen, HealthSouth, and Enron, revealed a significant weakness in the United States audit system. The significant weakness is the failure to deliver true independence between the auditors and their clients. In each of these companies there was deviation from professional rules of conduct resulting from the pressures of clients placed upon their auditors (Goldman, and Barlev 857-859). Over the years, client and auditor relationships were intertwined tightly putting aside the unbiased function of auditors. Auditor careers depended on the success of their client (Kaplan 363-383). Auditors found themselves in situations that put their profession in a questionable time driving them to compromise their ethics, professionalism, objectivity, and their independence from the company. A vital trust relationship role for independent auditors has been woven in society and this role is essential for the effective functioning of the financial economic system (Guiral, Rogers, Ruiz, and Gonzalo 155-166). However, the financial world has lost confidence in the trustworthiness of auditor firms. There are three potential threats to auditor independence: executives hiring and firing auditors, auditors taking positions the client instead of the unbiased place, and auditors providing non audit services to clients (Moore, Tetlock, Tanlu, and Bazerman 10-29). According to the Institute of Internal Auditors, “conflict of interest is a situation in which an internal auditor, who is in a position of trust, has a competing professional or personal interest (Institute of Internal Auditors)”. Competing interests can make it difficult to fulfill his or her duties impartially as an auditor. "A perso... ... middle of paper ... ...tion Law 29 (2):363-383. 365-partners and clients Threats to Auditor Independence: The Impact of Relationship and Economic Bonds. By: Ping Ye; Carson, Elizabeth; Simnett, Roger. Auditing, Feb2011, Vol. 30 Issue 1, p121-148, 28p, 1 Diagram, 6 Charts; DOI: 10.2308/aud.2011.30.1.121 Exploring Trust and the Auditor-Client Relationship: Factors Influencing the Auditor's Trust of a Client Representative. By: Rennie, Morina D.; Kopp, Lori S.; Lemon, W. Morley. Auditing, May2010, Vol. 29 Issue 1, p279-293, 15p, 1 Diagram, 3 Charts; DOI: 10.2308/aud.2010.29.1.279 The Auditor-Firm Conflict of Interests: Its Implications for Independence: A Reply. By: Goldman, Arieh; Barlev, Benzion. Accounting Review, Oct75, Vol. 50 Issue 4, p857-859, 3p Are Auditors Becoming Too Cozy With Their Clients? By: Briloff, Abraham J.. Business & Society Review (00453609), Summer85, Issue 54

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