Independent situations

Question : The following are independent and material situations ? Answer : Introducation Actual Independence Actual independence is the real independence which enables the auditor to take independent decisions in situations of under pressure.It reflects the independence of mind.The auditor should perform his work free from any conflicting responsibilities(Alvin Arens,Randal Elder,Mark Beasley,Chris Hogan,2016).It is the art of giving non biased opinions which is not influenced by anyone in anyway. Perceived Independence Perceived independence is the independence in appearance. It is not the true independence. It results due to auditors close relationship with key personnel of the company. E.g. Auditor best friend holds 50% shares of the entity in which he is appointed as an auditor.Definitely in this case auditors opinion on financial statement will be influence by the interests of his fiance.He will not act in an independent way though he is perceived as an independent auditor (Steven Bragg, 2014). 1.Bob has breached Sec 140 of Confidentiality of APESB and ASA 200.This section says that an auditor will be guilty of misconduct if he discloses or uses any information of his client acquired in the course of his professional duties until and unless prescribed by specific authority or required by law.As per ASA 200,Overall objectives of an independent auditor and the conduct of an audit in accordance with Australian Auditing Standards,confidentiality is one of the objectives of an independent auditor( Janice Loftus,Ken J Leo,Kerry Clark,Victoria Wise,2012). Alternatively Bob can use the online reference material and information which could assist him in completing his university assignment.He can take the help of popular cases through online material. 2.Wendy has breached Sec 120 of objectivity,Sec 210 of professional appointment and sec 290 of independence of APESB.Sec 120 says that an auditor should be clear of his objective to report in an independent manner to the stakeholders of the company.Sec 210 says that appointment of an auditor should be in a proper way in annual general meeting and Sec 290 talks about independence of auditor in delivering his responsibilities. Alternatively Wendy should suggest a company secretary having good reputation to take over the work of Ace Ltd.He should continue working as an engagement partner( Janice Loftus,Ken J Leo,Kerry Clark,Victoria Wise,2012). 3.Leo has breached Sec 290 of APESB of Independence of auditor.He has an indirect interest in Precision Machinery Limited as his father is a foreman in that company. Therefore in this case Leo independence is seem to be seen as perceived independence.It has also breached ASA200 of Australian Auditing Standards As a matter of fact other auditor can take up the audit of Precision Machinery Ltd who doesnt have any direct interest.In that case he can exercise professional judgement and can base his opinion on true facts and figures.Whereas if Leo would have done the audit,his independence would be seen as perceived independence(Rick Hayes,Philip Wallage,Hans Gortemaker,2014) 4.Chan Associates has breached Sec 240 of APESB of Fees and other types of remuneration.Fees given should be in terms already decided at the time of engagement.Any deviation from the standards is not valid. Alternatively terms of remuneration can be revised only if agreed by both the parties together.It can be changed by passing a special resolution in the annual general meeting. References Rick Hayes,Philip Wallage,Hans Gortemaker(2014).Auditing of Financial Statements-Principals of Auditing.UK.Pearson Publishers Janice Loftus,Ken J Leo,Kerry Clark,Victoria Wise(2012).Understanding Australian Accounting Standards.Melbourne.John Wiley Sons Alvin Arens,Randal Elder,Mark Beasley,Chris Hogan(2016).Auditing and Assurance Services.UK.Pearson Steven Bragg.(2014).Financial Analysis:A Business Decision Guide.Accounting Tools,2nd edition.