Audit Comittees and Auditor’s Independence

Mohamad Chaouki Ayoub & Angelito Haciñas Mendoza

Student thesis: Master thesis


The purpose of the thesis is to examine whether the audit committees increases auditor’s independence in public interest entities by several tasks. The European Commission has, with the publication of the Green Paper, ‘Audit Policy - Lessons from the Crisis’, questioned the independence of auditors and the accuracy of the auditor report. The above mentioned together with the financial crisis have led to the introduction of a new regulation 537/2014 and a new directive amending the Statutory Audit Directive of 2006. Our approach to the research is the work of critical hermeneutic. Our prior understanding, which is that the legislation for audit committee does not guarantee the auditors’ independence, will be challenged throughout our study. The independence of auditors consists of two sides respectively in mind and in appearance. It is essential for the auditor to appear independent to ensure stakeholders’ confidence in the audited financial statements. Auditors’ independence is partly regulated by ‘Revisorloven’. Furthermore, the handbook, ‘The Code of Ethics for Professional Accountants’, which inlcudes a principle-based approach, has been written to provide ethical guidelines. This is relevant as the auditor has an obligation to assess his own independence in every circumstance. As part of the regulation 537/2014, there are now a limitation to auditing fees, mandatory audit firm rotations and a separation of audit and non-audit services. It has become a vital role for companies to help monitor auditor independence by establishing audit committees, although auditors play a significant role ensuring their own independence. To examine whether the new regulation for audit committees increase auditor independence, six interviews have been conducted together with an analysis of 40 public interest entities. In our analysis, we conclude that the audit committees do not increase auditor independence in terms of auditor’s actual independence. The existing independence is anchored in auditor’s personality, which cannot be regulated. However, audit committees may increase the auditor’s independence in terms of appearance, but the premise for this is that the members of the committees have sufficient auditing skills. We conclude that a great number of these audit committees do not have the necessary insight and are therefore not suitable for monitoring auditor independence.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2018
Number of pages238