The independence of a company's outside auditors is crucial for guaranteeing the credibility of its financial statements. This vitally important principle is reflected in codes of conduct, which all state that independence is compromised if the auditors perform services other than those related to auditing, if they are financially dependent on the company that they are auditing, or if there are personal, business or financial ties between the auditors and the company.
Some services are seen as highly incompatible with the role of auditor, e.g. providing consulting services in internal auditing, accounting and financial information systems, or representing the company in litigation matters. Ethos considers all these points when it is called on to appoint auditors at a stockholders’ meeting. It votes against the auditors if it has any information which casts doubt on their independence.
Moreover, a series of shareholder resolutions calling for the adoption of a policy formally prohibiting an auditor from providing services not related to auditing have been announced for 2002. At the Walt Disney annual general meeting, ethos voted in favor of a resolution along these lines which gained 40% of the votes cast!
