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

Question

Quizplus · Accepted Answer

Having the independent auditor report to an audit committee of outside members of the board of directors helps to ensure that the auditor is not influenced by management and is able to provide an unbiased and objective opinion on the company's financial statements. This separation of duties enhances auditor independence and reduces the risk of financial misstatements. B is not as effective as it only requires the auditor to attend the annual general meeting, which may not provide enough opportunities for the auditor to interact with the audit committee. C is not recommended as it creates a potential conflict of interest and could compromise the independence of the audit firm. D is a good practice, but it may not be sufficient to ensure full auditor independence.

To Emphasise Auditor Independence from Management, Many Companies