ABSTRACT
Independence is the cornerstone of auditing. Investors and creditors demand that an objective third party examine corporate financial statements because they fear that the management-prepared reports might be biased. Independence is a state of mind. The American Institute of Certified Public Accountant's (AICPA) second general standard of auditing requires that, “In all matters relating to the assignment, independence in mental attitude is to be maintained by the auditor or auditors.” In spite of the many Securities and Exchange Commission and AICPA rules enacted to protect auditors’ perceived independence, doubts about auditors’ independence persisted throughout the second half of the twentieth century. One of the great ironies of the public accounting profession is that although auditors are expected to render impartial opinions, they are hired and paid by the organizations whose financial statements they audit.
