The utility of independence in preventing audit failure

Focuses on independence as an essential component in preventing audit failures and why the audit profession needs to maintain independence to improve its services. Outlines the Code of Professional Conduct from the Accountancy Body, and the draft rules on ethics by the joint accountancy committee in 1993. Indicates what the threats are to independence: being indebted to a client company, receiving a recurring fee which is over 15% of the practice’s gross fee, accepting a loan from a client or goods and services on favourable terms, owning shares in it, and so on. Suggests that responsibility for appointing auditors should be handed back to shareholders, that auditors should be rotated every three years, and that a limit be put on the proportion of the auditor’s income from a single client.