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REG NUMBER :C16127948C

LEVEL :2.1





Explain how the provisions of the Companies Act (23:03) attempt to protect auditors
independence (20)

Defination of terms

Companies act-is a paramount and vital legislation regarding the information ,

incorporation , governance , management , regulation , and winding up of all types of entities
in all economic sectors within the specified country. (Attorneys at law Attorneys)

Auditor -is an official whose job is to carefully check the accuracy of business records.
An auditor can be either an internal auditor , external auditor or independent auditor for
accounting firms in the public or private sector. (Investopedia)

Auditors independence- refers to the independence of the internal and external auditor
from parties that may have a financial interest in the business being audited . Independence
requires integrity and an objective approach to the audit practice.


For an audit report to worth its salt , the auditor who prepared it , must be seen to be , and
actually be , truly independent and free of any undue influence (J. Haste, 2012). Auditors
independence is commonly referred to as the cornerstone of the auditing profession since it is
a foundation of the public trust in the accounting profession. An auditor is required to be
independent from the entity it audits. The independence requirement applying to auditors
are legally enforceable. Maintaining independence has a number of aspects that the auditor
must of throughout the client or auditor relationship. Thus threats like, self- interest threat ,
self- review threat , advocacy threat and intimidation threat just to mention a few.

Self- review threat

This is when any product or judgement from a previous engagement needs to be evaluated to
reach conclusions on the current engagement , or a similar circumstance in which a member
in effect is reviewing his or her own work (Expert 123). For example , were member has
been involved in maintaining the accounting records of a client he may be willingly to find
fault with the financial statements derived from those records . This would threaten the
auditor fundamental principle of objectivity. The Companies Act (23:03) section 153:1 states
that in the auditors report , the auditor shall make a report to members on the accounts
examined by him and on every balance sheet , every profit and loss and all group accounts
laid are properly drawn in accordance with the act ,so as to give a true and a fair view of
the state of the company .

Furthermore , the Companies Act protects the auditors in the sense that , the auditor has to
give his views if proper books were kept. There is need for the attachment of a copy of the
financial statements so as to prove that the statements are in or not in agreement. To solve
this dispute there is need of discussion of the independence issues with the board of directors
and the audit committee and disclosing the services provided if such a threat arises.

Intimidation threatsss

This occurs when a member of the audit team may be deterred from acting objectively and
exercising professional scepticism by threats , actual or perceived from directors , officers or
employees of an audit client (P. Education , 3rd edition) . For example dominant personality
in a senior position at the audit client , controlling dealings with the auditor . This usually
threatens the auditor if there are unlawful practices being done , of which the auditor will be
afraid of reporting to seniors or the client which might damage his or her career with the firm .
The safeguard to his threat is to have a corporate governance structure such as an audit . This
occurs when a member of the audit team may be deterred from acting objectively and
committee that provides appropriate oversight and communication s regarding the audit
firms services .

The Companies Act section 154 states that , the auditor have rights to access all times the
books and all information sources and explanation sources he or she might think is
necessary to the auditing process and have to air out his views in the general meeting .
Also if there are unlawful practices being done in the firm , there is need to address them
in the meeting. This threat needs educational training and experience requirements for entry
into the profession and legislation governing to independence requirements of the audit firm .

Advocacy threat

This occurs when the audit firm , or a member of the audit team , promotes or may be
perceived to promote an audit clients position . For example acting as an advocate on behalf
an audit client in litigation or resolving disputes with third parties . In this case the auditor
would have to be biased in favour of the client and therefore cannot be objective in his
approach . This could happen if the client asked to promote their shares at the stock
exchange listing (Qoura) . The Companies Act (24:03) section 148 , now protects the
auditors independence by stating that ,defence to certain threat is to prove that he had
reasonable grounds to believe and did believe that competent and a reliable person was
charged with duty of seeing that requirement or provision referred to in a position to
discharge that duty .

To minimize this conflict there must be procedures and proceedings that emphasize the client
commitment for fair financial reporting.

Self-review threat

This occurs when an auditor has a beneficial interest in a clients performance. For
example ,the acceptance of gifts and hospitality (Knowledge Bank). This could be perceived
as bribery to keep quiet about issues in financial statements . Goods and services should not
be accepted by practice or by anyone closely connected with the client unless the value of any
benefit is modest . Acceptance of undue hospitality poses a similar threat of self-interest . A
bottle of Scotch at Christmas is acceptable but a holiday to Paris would probably not be .

The Companies Act (24:03) section 150 protects auditors remuneration by stating that ,
remuneration of auditors shall be fixed by the company in the general meeting or in such
manner (acceptance of goods and services) as the company in general meeting my
determine. All sums paid by the company in respect of the auditors expenses shall be
deemed to be included in the expression remuneration and cannot be hidden by including
it in the global figure such as administration expenses . This will protect the auditor from
the whistle blowing effect.


In a nutshell , the purpose of the Companies Act is to enhance the credibility of financial
statements by providing with reasonable assurance from an independent source . Bearing in
mind that they present a true and a fair view in accordance with the accounting standards not
forgetting the independence of the auditors.

-Millichamp (Auditing 8th edition).

-Qoura (

-Auditing and assurance services . An integrated approach, 13th Edition by Pearson


-Mbwambo . E . C (Analysis of threats to Auditors independence and safeguards)

-Rogger .H (Corporate Governance Volume 7)

-Zimbabwean Companies Act ( Revised) (24:03)

-Kaplan Financial Knowledge Bank

-Haste J 2017

-Expert 123 ( )