Mallon Resources Corporation
1. An auditor’s independence is defined as an unbiased, free of conflict of interest and impartial reviewing of the results of a company’s financial activities and issuing an opinion on the financial statements. The auditor must remain independent in mind such that he or she may express an opinion on financial statements without being affected by any sort of influences that may distort his or her professional judgement. Moreover, the auditor must remain independent in appearance such that his integrity, professional skepticism, objectivity and professional judgement is not concluded to be compromised by a third party. An auditor may face various thread to independence during practice such as self-interest, self-review, advocacy, familiarity and intimidation.
Independence is considered as the cornerstone of the auditing profession because an auditor is supposed to protect public’s interest and users of financial statements. Auditor’s independence gives users of financial statements confidence and trust so they may rely on provided results. Otherwise, there will be no credibility on auditor’s work.
2. February 15, 1994: A conflict of interest situation arose and independence was impaired because the client offered a job while Knight was the audit manager during client’s audit engagement.
February 17, 1994: Independence is impaired by Knight because he received a written offer of employment from client. He should have resigned form audit right away.
February 24, 1997: Independence is violated because Knight accepted an offer while still working on client’s audit engagement. The audit had been contaminated due to lack of independence.
February 24 – March 28, 1994: Audit has been contaminated because of self-review threat to independence. Knight prepared the drafts which were then audited by the audit firm where he was still an employee.
March 29, 1994: Audit has been contaminated because Knight lied about his position at the firm. The firm had a
Independence is considered as the cornerstone of the auditing profession because an auditor is supposed to protect public’s interest and users of financial statements. Auditor’s independence gives users of financial statements confidence and trust so they may rely on provided results. Otherwise, there will be no credibility on auditor’s work.
2. February 15, 1994: A conflict of interest situation arose and independence was impaired because the client offered a job while Knight was the audit manager during client’s audit engagement.
February 17, 1994: Independence is impaired by Knight because he received a written offer of employment from client. He should have resigned form audit right away.
February 24, 1997: Independence is violated because Knight accepted an offer while still working on client’s audit engagement. The audit had been contaminated due to lack of independence.
February 24 – March 28, 1994: Audit has been contaminated because of self-review threat to independence. Knight prepared the drafts which were then audited by the audit firm where he was still an employee.
March 29, 1994: Audit has been contaminated because Knight lied about his position at the firm. The firm had a