External auditor independence is crucial to investor confidence. Since the end of 2000 an important codification effort has taken place on this issue : in the United States, the Final Rule on Auditor Independence was adopted by the Securities and Exchange Commission (SEC) in November of last year; this year, the International Federation of Accountants (IFAC) inscribed its principles on independence in its Code of Ethics for Professional Accountants.
Influenced by these developments, the Chambre fiduciaire suisse revised its own directives sur l’indépendance which have just been published and will enter into force on 1 January 2002.
The new directives define personal, business and financial relationships as well as five types of non-audit services which could call into question an auditor’s independence. From now on, audit firms should take appropriate steps on an organisational and personnel level in order to mitigate such risks and to ensure that the auditor’s objectivity and independence is guaranteed.
Given the extreme importance of the principle of independence, codes of best practice concur in stating that there is loss of independence in cases of personal, business or financial relationships and when fees paid for non-audit services exceed auditing fees over a number of years. To have access to such information in order to evaluate the situation, ethos advocates increased transparency and requests companies to disclose the detail of audit and non audit fees paid to their external auditor.
For more detailed information, please consult the following web sites :
http://www.sec.gov/rules/final.shtml
http://www.ifac.org/Guidance/EXD-Outstanding.tmpl
http://www.treuhand-kammer.ch
