Auditor Independence: SMP Perspective

This article examines auditor independence from the perspective of Small and Medium Practitioners (SMPs) in India. It underscores independence as vital for financial reporting integrity, with heightened scrutiny under the Companies Act, 2013, and NFRA’s oversight. SMPs face challenges such as resource constraints, ambiguous prohibitions under Section 144, and balancing audit and non-audit services. While global models like SOX and FRC impose strict bans, the paper advocates a nuanced, risk-based approach for India. It proposes practical safeguards and a phased roadmap to strengthen independence without undermining SMP viability, ensuring trust in audits across all market segments.

INTRODUCTION

Auditor independence stands as the bedrock of the accountancy profession, underpinning the credibility and reliability of financial reporting. It is the assurance that the auditor’s opinion on the financial statements is unbiased and free from any influence. The auditor’s independent opinion is fundamental to the trust of various stakeholders, and it serves as a guide in making critical decisions. Without this trust, the audit function loses its value, and the integrity of the whole financial system as well as the profession.

In India, the requirement for statutory audits has a long history, but the focus on auditor indepen