“Independence of auditors must not only exist in fact, but should also appear to exist to all reasonable persons”. This statement is very important as very often relationships are misunderstood. The auditor has to conduct himself in such a way that no reasonable person can doubt his objectivity and integrity. In fact, the word “independent” as a prefix in any audit proposition in itself enshrines the concept of independence of an auditor and it is thus considered fundamental concept in the theory of auditing. As per para 14 of NSA 200 “Overall Objectives of an Independent Auditor and conduct of audit in accordance with NSA” The auditor shall comply with relevant ethical requirements, including those pertaining to independence, relating to financial statement audit engagements. It is however, not possible to define “independence” precisely since independence is a state of mind and personal character. Independence is a qualitative condition. Professional bodies frame rules to help and guide their members to preserve independence.
The relationship between the auditor and the client should be such that firstly he himself is satisfied about his client and it is understood others that the independence of the auditor is not affected.
The main objective of an independent audit is to enhance credibility for financial information contained in financial statements expressing an independent opinion. The ultimate list for accepting the auditor’s opinion on the financial information any category of persons, say, banks, tax authorities, creditors etc. would depend upon the fact that whether an auditor is perceived independent or not. Reliance on the reports and opinions of the members of a profession depends upon standard of independence prescribed the professional body. In other words, the respect and dignity of a profession is based on independence enjoyed its members. If an auditor maintains high standard of independence and impartiality, his report will be accepted and respected all Stakeholders Viz. banks financial institutions, Government, investors etc. Professional integrity and independence are essential characteristics of all the professions but are more so in the case of accounting profession. The entire objective of audit would be lost if an auditor is not independent only in mind and as well as in appearance.