Accountant Independence Essay

Accountant Independence Essay

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What exactly is accountant independence? I have determined that accountant independence is very similar to being an independent auditor. When it comes to auditor independence, it refers to the independence of the internal auditor or the external auditor from parties that may have a financial interest in the business being audited. The initial concept of auditor independence was developed in the 19th century, which primarily originated with the British. In that era, British investors didn’t allow auditors to work in the businesses that they audited. The initial concept began to change in the early 20th century due to the shift in capital from foreign to domestic sources in the railroad, mining industries and the inventions of the telegraph and telephone. As time passed to the 1970’s, FASB was established as the authoritative independent accounting standards setter. In the second half of the 20th century there were ongoing debates about accountant independence. Thomas A. Lee, in Company Auditing, 3rd ed. (Van Nostrand Reinhold, 1986, page 89), said, “An honest auditor will behave like someone who is independent, using independence to mean an attitude of mind which does not allow the viewpoints and conclusions of its possessor to become reliant on or subordinate to the influence and pressures of conflicting interests.” This statement was very admirable but didn’t include the auditor’s state of mind as they audited. On the other hand, P. Moizier, in “Independence” (in Current Issues in Auditing, Publishing Ltd., 1991), argued for an economic rationale for auditor independence. He said “There is an expectation that the auditor will have performed an audit that will have reduced the chances of a successful negligence lawsuit to a level ...

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... used fraudulent accounting methods to hide the declining earnings in order to make the illusion that they were growing financially. They were underreporting line costs by capitalizing the cost on the balance sheet rather than properly expensing them, and inflating revenues with bogus accounting entries from “corporate unallocated revenue accounts.” Exodus 23:1 says, “Do not spread false reports. Do not help a wicked man by being a malicious witness.” These people obviously did not abide by the Bible and what it says. They were trying to take the easy way out and once again it backfired.
In 2002, President George Bush signed the Sarbanes-Oxley Act into law. This legislation was created in response to the high profile Enron and WorldCom financial scandals to protect shareholders and the general public from accounting errors and fraudulent practice in the enterprise.

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