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A Guide to Forensic Accounting Investigation, 2nd Edition by Jessica S. Pill, Mona M. Clayton, Thomas W. Golden, Steven L. Skalak

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Chapter 11

Independence, Objectivity, Skepticism

Steven L. Skalak and Thomas W. Golden

This chapter divides at the center. On this side of the divide is a necessary account of legislation, codes, and rules that now govern the critical issues of auditor independence, objectivity, and professional skepticism. On the other side are case studies illustrating independence, objectivity, and professional skepticism in action during the course of forensic accounting investigations.

The wave of financial scandals at major corporations in the early 2000s prompted lawmakers to pass new laws governing the accounting industry and the public companies they audit. Sarbanes-Oxley was enacted in part to remedy the perceived weaknesses in corporate governance and oversight of the auditing profession and to eliminate potential conflicts of interest. Among the areas that the Act addresses is auditor independence. In the wake of the recent financial crisis, independence as long practiced by the auditing profession is now being recognized as a responsibility of other capital market participants. For example, the Accountability and Transparency in Rating Agencies Act of 2009 proposed in the United States and the European Union's Regulation of the European Parliament and of the Council on Credit Rating Agencies enacted in 2009 focus on the following four points:1

1. First, to ensure that credit rating agencies avoid conflicts of interest in the rating process or at least manage them adequately

2. Second, ...

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