Clearly, independence is threatened where audit staffs join a client company. For example, the knowledge of audit approach, perhaps influence over, or close relationship with, continuing audit staff could be factors which threaten an objective approach. The level of the threat would in part be determined by the seniority of position in the client company. (For example, the former engagement partner becoming a client company director would present the greatest risk).

The firm’s independence procedures should include safeguards to ensure that objectivity and independence is not compromised and would include:

  • Non- involvement in client audit staff leaving
  • Consideration of whether to continue the audit engagement
  • Rotation of audit partner/staff on subsequent audits
  • Requiring a gap period
  • Judgments. Objectivity is the state of mind which has regards to all considerations relevant to the task in hand but no other. It presupposes intellectual honesty.

Advantages of an Ethical Framework’ approach.

It is also important to realize that the ethical framework approach has advantages over rule based systems. The main advantages are considered to be as follows:

  • It is virtually impossible for rule based systems to be able to deal with every situation that may arise.
  • The onus is very much placed on the auditor to demonstrate that each matter is properly considered within the principles of the framework
  • A framework is more appropriate to changing circumstance in a dynamics profession.
  • Rule based systems can be interprets narrowly in order to circumvent the underlying ‘spirit’ or intention of the rule.
  • A framework approach may include some specific ‘prohibitions’ or rules to deal with certain specific matters.