How to Determine Independence?

If a fair and unbiased opinion is to be provided on the reported information, the assurance provider must be objective.    Because objectivity is difficult to determine, an organization attempts to select a provider who is independent of the organization being serviced.

There are several ways in which an assurance provider’s independence can be tainted, but here are three key examples:

  • The assuring firm has a financial interest in the reporting organization (e.g., employees of an assuring firm own shares in the reporting organization).
  • The assuring firm is heavily dependent on the reporting organization for income (e.g. a major client) and therefore runs the risk of losing the organization as a client if the results are not positive.
  • The assuring firm is asked to provide assurance on its own work.  (e.g. the assurance practitioners implement a data management system and then are asked to provide assurance on the data reported via that system).