An Empirical Analysis of the Impact of Auditor's Independence on the reliability of Financial Statements.

Abstract

In this study the independence of auditors was critically evaluated and the importance of auditors’ independence in financial statement credibility was analyzed. In order to make informed decision it is important for the financial statement to be credible. The auditors are expected to audit the financial statement of companies in order to present a true and fair view or otherwise of the financial statement. The data used for this work were collected from both primary and secondary sources. The relevant data collected were analyzed using simple percentages and tables and tested using chi-square.The results of the test show that auditor’s independence affects the credibility of financial statement and the improvement in the credibility of the financial statement can reduce manipulation in the financial statement. The reason why audit exists is because investors and creditors can make use of financial statement to make their decisions. The study concluded that auditors’ independence and the credibility of financial statement are to be significantly impaired when non-audit services are conducted and that there is a positive relationship between independence of an auditor and the credibility of financial statement, therefore the independence of an auditor is fundamental to the credibility of financial statement.Finally, the study recommends that there should be rotation of auditors to improve the auditors’ independence, implementation of peer assessment in other to ensure that audit are carried out with utmost professionalism and mutual respect and that auditors should not be allowed to provide audit client with any other advisory services.

Key words: External Auditor, Financial Statement, Auditors Independence