Factors That Can Compromise The Auditor’s Independence

It is undesirable that the auditor derives a huge proportion of his income from one single client. If this happens the auditor is likely to be compromised by this client

Personal Relationships
It is desirable to avoid personal relationships with the client and his staff. Conflict of interest is likely to arise in cases where there exist such relationships

Beneficial Shareholdings
In general, partners, their spouses and minor children should avoid owning shareholding the clients companies. Staff members who own shareholding in companies should not be engaged in the audit of these companies.

Loans to and from Clients
The auditor should avoid granting or receiving loans and other such inducements from the companies for which they audit.

Acceptances of goods/services from Clients
Goods and service should only be accepted only to the extent that they do not threaten the independence of the auditor. Acceptance of undue hospitality may pose threats of independence.

Many auditors receive commissions from financial institutions when they act for the clients. It should be seen that any advice should be in the best interest of the client and not vice versa. The client should be informed in writing that commission will be received and as far as possible on what terms.

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