European Commissions Proposal to Introduce Audit Independence Reform Essay

European Commissions Proposal to Introduce Audit Independence Reform - Essay Example This paper illustrates that following the evaluation, the auditors determine the level of conformation between those declarations and the required auditing standards, and communicating their opinion through the audit report. The quality and authenticity of audit report and compliance with the prescribed practices of audit standards have always been a subject of discussion in the corporate environment. Adherence to audit standards practice is necessary as it helps a corporate organization to lessen risks as well as optimize its business performance at the same time. Currently, the competitive business environment that prevails worldwide, calls for a rigid regulatory setting and compliance to audit standards norms, for businesses and the financial system to sustain in the long run. However, the European Commission considers the global economic depression during 2007-2009 had pointed out significant drawbacks in the audit system followed in Europe. The Commission believes so because man y financial organizations were found to have been given clean reports by their auditors, in spite of the fact that those institutions had grave financial health issues. As a result, the European Commission had proposed a number of reforms to improve the independence of the auditing profession. To alleviate the danger of any impending conflict of interest owing to an acquaintance risk, the European Commission in its report has proposed that all publicly listed companies will have to obligatorily alter their auditor after each six years in case they had employed one auditor to execute the audit process, and after each nine years when two auditors were employed to perform the audit. This proposed reform is said to have a number of advantages in the context of dealing with issues like conflict of interest and in so doing enhancing the quality of the audit. The major advantage expected from this reform is the reinforcement of professional skepticism.