Commercial Relationships Versus Objectivity
One of the major issues faced by private auditing firms is the need to provide independent auditing services while maintaining a business relationship with the audited company.
The auditing firm's responsibility to check and confirm the reliability of financial statements may be limited by pressure from the audited company, who pays the auditing firm for the service. The auditing firm's need to maintain a viable business through auditing revenue may be weighed against its duty to examine and verify the accuracy, relevancy, and completeness of the company's financial statements.
Numerous proposals are made to revise the current system to provide better economic incentives to auditors to perform the auditing function without having their commercial interests compromised by client relationships. Examples are more direct incentive compensation awards and financial statement insurance approaches. See, respectively, Incentive Systems to Promote Capital Market Gatekeeper Effectiveness and Financial Statement Insurance.
Read more about this topic: Financial Audit
Famous quotes containing the words objectivity and/or commercial:
“Institutions of higher education in the United States are products of Western society in which masculine values like an orientation toward achievement and objectivity are valued over cooperation, connectedness and subjectivity.”
—Yolanda Moses (b. 1946)
“I do seriously believe that if we can measure among the States the benefits resulting from the preservation of the Union, the rebellious States have the larger share. It destroyed an institution that was their destruction. It opened the way for a commercial life that, if they will only embrace it and face the light, means to them a development that shall rival the best attainments of the greatest of our States.”
—Benjamin Harrison (18331901)