Adopt a framework approach to ensure auditor independence
Using a set of fundamental principles as a compass, auditors can meet an infinite number of circumstances. A rules-based approach would be unwieldy.
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RECENT corporate controversies at Midas and Vard have once again put the role of independent directors in the spotlight. This is unsurprising, considering that a critical element to the efficient and effective operation of capital markets is the quality of the audit, and auditor independence is one of a number of important blocks on which that quality is built.
Auditor independence issues are complex. The most effective way to ensure the reality of independence is to provide guidance centred on a framework of principles rather than a detailed set of rules that can be complied with to the letter but circumvented in substance. This is in line with the upcoming revisions to Singapore's Code of Corporate Governance, which includes increased scrutiny of and enhancements to internal audit, particularly the criticality and independence of internal audit.
WHAT A FRAMEWORK APPROACH ENTAILS
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