[Account Ant]

I was reading Code of Conduct, and got confused independence in fact and in appearance. I saw these questions in Bisk but I never get it. Guys help me! Thank you.

FAR 70,89
REG November 2014
BEC Didn't even look at it.
AUD 83

[Last_First_MI]

Independence in appearance is what third parties would perceive as being independence so you are perceived by others to be independent. If you audit a company and your brother is the CEO or the Chairman you would be perceived to not be independent.

Independence in Fact is based on your actions in a situation or real independence. Would you be able to make independent decisions if you were pushed into a corner and under pressure? Even if you weren't perceived under independence of appearance would you still act independently without being influenced in anyway.

Hope this helps. Easiest way I could think to explain it.

[Account Ant]

Last_First_Mi

Thank you so much, I got indepence in appearance. But still confused independence in fact. Is it same with indepence in mental?

FAR 70,89
REG November 2014
BEC Didn't even look at it.
AUD 83

[Account Ant]

FAR 70,89
REG November 2014
BEC Didn't even look at it.
AUD 83

[Last_First_MI]

Yes I would say it is the same as in mental. As it really is a state of mind and how you act and think yourself, how you would make decisions. Its kinda like ethics its your own actions that determine this. Its your decision and actions that determine how your independence in fact/mental is.

I will try to make an example. You are a new auditor and you are out to impress your boss and the company you are auditing is company you admire and you like the people that work there and maybe work there yourself one day. At a meeting your boss stresses how big of a client this is and how much revenue it brings into your firm every year they are an audit client. Knowing this information can you still go into the audit with the right state of mind to make the decisions a prudent auditor should? Or would this influence you performance to maybe not be as prudent?

[Account Ant]

I get it, in this case I would more be in favor of this company. So independence in fact, mental would not be met. Because if I give this company qualified opinion my boss will kick me out. So I will try to give them unqualified anyhow. Thank you so much.

FAR 70,89
REG November 2014
BEC Didn't even look at it.
AUD 83

[rknight21]

independence in fact is when your genuinely independent from the client……

with that said it isnt enough to be independent in fact………

you have to in appearance too……..

so no close relationsip can exist between the auditor and persons in key positions with the client. because a third party might question the dept of the relationship…

[Erica H]

Here's an example of independent in fact versus appearance.

Your fiance owns 50% of a company (or is in a position of significant influence). You may technically be independent (independent in fact) as neither you nor any of your family members own stock in the company. However nobody would actually see you as independent (independent by appearance). It's obvious that you are not independent if your fiance, your best friend since age 5, or your favorite God-daughter who stands to inherit all you own are employed by or own the company.

Another example would be if someone from the company has some kind of potentially negative control over you. Maybe they have downloaded potentially incriminating pics of you from your FB, because when you were 21 you were an idiot and posted them online. You may be independent in appearance (you don't have any obvious ties to the company or anyone of significant influence) but you are NOT independent in fact, as they do in fact have influence over you.

Does that help?

AUD - 92
FAR - 73, 82
REG - 72, 82
BEC - 84 DONE!!!!!! 🙂

[Author]

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