Abstract:
ABSTRACT
Auditor independence meaning independence of both the firm engaged to perform external audits and the individual auditors who conduct the audits–is a central facet of external auditing. The previous chapter emphasized the importance of auditor independence and objectivity to internal auditing and noted the challenge to achieve true independence in internal auditing when the auditors are employees of the organization being audited. Aside from the contractual and financial relationship between an organization and its external auditors, maintaining the independence of external auditors is a strict requirement in most legal and regulatory forms of auditing, especially when the subject organization is a publicly traded entity. The lack of auditor independence in the accounting scandals and subsequent bankruptcy of major corporations including Enron and WorldCom, coupled with the subsequent dissolution of accounting firm Arthur Andersen, significantly influenced the inclusion of more stringent independence requirements in the Sarbanes–Oxley Act and subsequent rule-making by the SEC and the Public Company Accounting Oversight Board (PCAOB). The European Commission proposed and adopted similar rules in the wake of both major US corporate problems and similar scandals among European companies including Italian food producer Parmalat and Dutch retailer Ahold. The net result of these major corporate audit and accounting failures is a current regulatory environment in which auditor independence is considered absolutely essential. In carrying out the study, the hypotheses were formulated in line with the specific objectives. The type of research design adopted for the purpose of this study was the survey design. The design was used to examine internal audit effectiveness in improving the financial performance of a company using the pharmaceutical manufacturing industry of Ghana . The survey research made use of Archdiocesan Health Pharmaceutical as representative of the pharmaceutical manufacturing industry. This research work has contributed enormously to knowledge; it has added more empirical literature to the impact of internal audit effectiveness and financial performance and has also introduced important insights from the accounting literature.
