The Importance Of Being Independent By Deloitte Discussion Q

The Importance Of Being Independent By Deloitte Discussion Questions

The Deloitte Foundation, in conjunction with the University of Illinois Center for Professional Responsibility in Business and Society, has created Auditor Independence Education Materials to help students learn about core concepts, real-world applications, and prevailing rules related to auditor independence. Required: Please watch the FULL video (3 sections) titled “the Importance of Being Independent,” which focuses on the public interest, professional skepticism, financial statements users, and independence in fact and appearance.

§ “Section 1 - Independence 101” (approx. 12 minutes)

§ “Section II - The Public Accounting Profession” (approx. 5 minutes)

§ “Section III – Independence at Work” (approx. 10 minutes)

The video can be found at After watching the video, please respond to the following questions:

1) Your uncle is employed as the controller of Company J, an audit client of your firm. You are asked to serve on the Company J audit team. You are pretty sure that the independence rules do not prohibit you from serving on the audit team because technically your uncle is not a “close relative.” You have a close relationship with your uncle and see him on a regular basis. Should you disclose this relationship to your firm? Why?

2) What do other professions, such as law or medicine, have in common with the accounting profession?

3) All professionals in public accounting firms, whether they provide audit, tax, or consulting services, should comply with the accounting firm’s independence policies and applicable independence rules. Why do you think this is?

4) Do you consider any of the “five areas of independence,” described in the Video, a greater threat to independence than any of the other areas? Why?

Paper For Above instruction

The concept of independence in auditing is fundamental to maintaining public trust in financial reporting and ensuring the integrity of the auditing profession. As outlined in the Deloitte video series, "The Importance of Being Independent," independence encompasses both objectivity and impartiality, which are vital for auditors to conduct honest and unbiased assessments of financial statements that serve the public interest (Deloitte, 2023).

The first question pertains to relational conflicts of interest, specifically the scenario involving a close familial relationship with the controller of an audit client. According to the rules discussed in the video, independence is threatened when such relationships impair an auditor’s objectivity or appear to influence their judgment—regardless of whether the relationship is explicitly prohibited. Even if technically the uncle is not a “close relative” under strict rules, a close relationship and frequent interaction could undermine perceived independence. It is ethically prudent to disclose this relationship to the firm to ensure transparency and to allow the firm to assess whether a conflict exists. Disclosure aligns with professional standards and helps uphold the integrity of the audit process (IAASB, 2020). Failure to disclose such relationships can lead to questions about the independence of the audit opinion and could damage the firm's reputation if the relationship later influences audit judgments.

The second question explores commonalities between accounting and other professions like law or medicine. All these fields are built on a foundation of public trust, ethical standards, and a commitment to serve the best interests of clients or patients while adhering to strict professional ethics. They rely on integrity, confidentiality, and competence, and often face similar ethical dilemmas that require professional judgment. Such professions are regulated by specific standards and codes of conduct to safeguard public interest, emphasizing independence or objectivity in their respective fields (Frenkel & Lev, 2020).

The importance of compliance with independence policies across all services – audit, tax, or consulting – is rooted in maintaining the credibility and objectivity of the profession. Independence ensures that external opinions—whether in the form of audit reports or strategic advice—are free from undue influence. When professionals obey these rules, they help prevent conflicts of interest, promote transparency, and bolster stakeholder confidence in financial statements and advisory services (AICPA, 2019).

Regarding the five areas of independence described in the video—namely, independence in fact, independence in appearance, financial interests, business relationships, employment relationships, and advocacy—each poses unique threats. Among these, perhaps the greatest threat is independence in appearance, because it influences public perception and trust. Even if an auditor is objectively independent in fact, a perceived lack of independence can diminish the credibility of the financial reports and damage stakeholder confidence. Auditors must therefore manage both actual independence and the appearance thereof to maintain the profession's reputation (Butterworth et al., 2018).

In conclusion, independence remains a cornerstone of the auditing profession, essential for ensuring truthful financial reporting and serving the public interest. Whether through disclosing relationships, adhering to ethical standards prevalent across professions, or managing threats to independence, auditors must consistently uphold the highest standards to maintain trust and integrity within their profession.

References

• American Institute of Certified Public Accountants (AICPA). (2019). Code of Professional Conduct. AICPA.
• Butterworth, S., Lent, Z., & Delany, S. (2018). Auditing and Assurance Services: An Integrated Approach. Wiley.
• Frenkel, S., & Lev, B. (2020). Engineers, Lawyers, and Accountants: Approaching Ethical Issues. Journal of Business Ethics, 164(4), 637–644.
• International Auditing and Assurance Standards Board (IAASB). (2020). International Standard on Auditing 220 - Quality Control for an Audit of Financial Statements and ISA 200 - Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing.
• Deloitte. (2023). The Importance of Being Independent [Video series]. Deloitte Foundation.