Macleod Corporation are providers of independent audit services. Independence is defined the Oxford dictionary as being “1. free from outside control, not depending on anothers authority 2) not dependent on another for livlihood or subsistence 3) capable of thinking or acting for oneself 4) not connected with another or with each other; separate”
Independence of Auditors is regulated by professional accounting standards, Australian Auditing Standards and the Corporations Law.
The Accounting Professional and Ethical Standards Board APES110 Code of Ethics for Professional Accountants identifies the following fundamental principles:a) integrity, b) objectivity, c) professional competence and due care d) confidentiality, and e) professional behaviour ensuring the profession is not brought into disrepute.
Independence is fundametal to compliance with integrity and objectivity. APES 110 Section 220 requires practitioners to take all reasonable steps to identify circumstances that could pose a conflict of interest, then to evaluate those threats posed and apply safeguards to eliminate those threats. Safeguards identified include notification of the conflict of interest, use of separate engagement teams, special security and confidentiality arrangements. Where a conflict of interest exists it creates a threat to the fundamental principles of objectivity, confidentiality and professional behaviour. If this threat cannot be reduced to an acceptable level of risk, then the egagement shall not be accepted.
Australian Auditing Standard ASA102 “Compliance with Ethical Requiremnents when Performing Audits”, paragraph 5, requires that the auditor, comply with relevant ethical requirements, including those pertaining to independence, when performing audits, reviews and other assurance engagements. Paragraph A5 further identifies that in the case of an audit engagement, it is in the public interest and required by APES 110, that the auditor be independent of the entity subject to the audit. APES 110 describes independence as comprising both independence of mind and independence in appearance. The auditor’s independence from the entity safeguards the auditor’s ability to form an audit opinion without being affected by influences that might compromise that opinion. Independence enhances the auditor’s ability to act with integrity, to be objective and to maintain an attitude of professional scepticism.
Section 324CH of the Corporations Act, 2001 describes in a table the relationships between the auditor and auditee which would prevent an auditor from accepting their role. These include being a Director, employee, employer, investor, debtor, creditor or are the partner of a Director or employee, in the company being audited. Section 324DA requires that an individuals involvement in the audit of a listed company be limited to 5 successive years.
Macleod Corporation Pty Ltd are able to differentiate ourselves from other Accountants by our Independence because we only provide audit services. The provision of other professional services to clients including accounting, taxation, consultancy and training impinges on independence because: a) there may be a reliance on the fee, so the audit may brush over otherwise contentious issues, for which the client has paid for advice, and b) an audit opinion may be required on, or an audit reliance placed in the service or advice provided so that the advice is automatically accepted without scrutiny.