Blackwell Reference Online

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Auditors play a significant role in a free‐market economy. They lend credibility to published financial information, thereby enabling investors to more efficiently make investing choices and enhance society's ability to optimize its allocation of scarce financial resources. Most models of professional–client relationships include two actors, the professional and the client (see Faber, 2003 ). In contrast, the model of auditors' role in society includes three actors: the auditor, the auditee (business entity), and the investing public. Who is the client in such a model? Historically, auditors have understood they had a responsibility to the investing public to perform their services with independence, integrity, and objectivity. Nevertheless, the business entity's management hired them, paid them, and negotiated their fees. Auditors understood that the client was the corporation's management. Hence the model contained an inherent conflict of interest. The accounting profession has traditionally attempted to manage the conflict by emphasizing the requirements of their code of professional conduct to act with integrity and objectivity while maintaining independence in fact and in appearance. Independence can be conceptualized as the “golden mean” between the extremes of a mutuality of interests with the client and a conflict of interests between auditor and client. In 1994 an Advisory ... log in or subscribe to read full text