To emphasise auditor independence from management, many companies:
A) establish a policy of discouraging social conduct between company employees and the staff of the audit firm.
B) have the independent auditor report to an audit committee of outside members of the board of directors.
C) request that a representative of the auditor be present at the annual general meeting.
D) appoint a member of the audit firm to the company's audit committee.

Question

Quizplus · Accepted Answer

Having the independent auditor report to an audit committee of outside members of the board of directors is the best option for emphasising auditor independence from management. This ensures that the auditor is accountable to a group that is separate from the company's management, and can therefore provide a more objective assessment of the company's financial statements. Options A and C may help to maintain independence to some degree, but are not as effective as having an independent audit committee. Option D is not recommended as having a member of the audit firm on the company's audit committee could create a conflict of interest.

To Emphasise Auditor Independence from Management, Many Companies