- The absence of a relationship, obligation, or *conflict of interest that could comprise an auditor’s judgment. In external auditing, independence can be subverted (or can be perceived to be subverted) by many factors, including the following: (i) a financial interest in an *auditee’s business or in an audited transaction; (ii) family or personal relationships with *auditees; (iii) excessive entertaining or hospitality by or with auditees; (iv) lavish *gifts to and from auditees; (v) restrictions on the scope of audit work; (vi) an auditor’s overdependence on fees from one customer; and (possibly) (vii) the provision of lucrative *management advisory services. In addition to these aspects of independence, most of which are manifestations of potential conflicts of interest, the concept is often discussed in terms of a state of mind, involving personal character, ethics, and honesty. Therefore, while it has been suggested that auditing "requires a high level of technical knowledge, integrity, and interpersonal skills" (Beattie et al., 2001, 285, emphasis added), it has also been argued that independence "is an attitude of mind which goes deeper than any formal rules or standards" (Newman, 1964, 148). It is little wonder that Lee (1993, 100) refers to auditor independence as a "multi-dimensional concept." Independence is considered to be essential for an objective, unbiased external *audit opinion: "It is primarily on the basis of its independence that the external audit derives its authority and its acceptance" (Flint, 1988, 29). Or, expressed more evocatively, "the auditor, like Caesar’s wife, must be above suspicion" (Toffler and Reingold, 2003, 251). Further reading: AICPA (1997); Caswell (1999); Mutchler et al. (2001); Stevenson (2002); Windsor and Ashkenasy (1995); Youkins (1983)
Auditor's dictionary. 2014.