Independence v objectivity: what is the

difference?
https://www.icaew.com/international-accounting-and-auditing/international-standards-ethics/ethics-introduction-
and-fundamentals/independence-v-objectivity-what-is-the-difference

Here we look into distinguishing the difference between the two ethical concepts of
independence and objectivity.

These ethical concepts have always enjoyed an element of interaction. In ICAEW’s

1987 Guide to Professional Ethics (now known as the Code of Ethics) the
Statement on Professional Independence described it as a ‘concept fundamental to
the accountancy profession’ and ‘an attitude of mind characterised by integrity and
an objective approach’. This clearly explains objectivity as being part of
independence.

In ICAEW’s 1997 Guide to Professional Ethics Statement 1.201 on Integrity,

Objectivity and Independence referred to Objectivity as ‘independence of mind’.

Other more recent comments on the interaction have included independence being
considered as ‘a measure of objectivity’, or to independence ‘enabling’ an objective
conclusion. As we can see there is an element of circularity here.

Here we set out an analysis of current definitions, provide some practical

illustrations of how they currently interact and share ICAEW’s thoughts on
independence, drawing attention to ICAEW’s principles-based framework for
resolving ethical problems.

Current definitions and requirements

In the current IESBA Code of Ethics 120.1 Objectivity ‘imposes an obligation on all
professional accountants not to compromise their professional or business judgement
because of bias, conflict of interest or the undue influence of others’.

The current IESBA Code of Ethics definition of Independence explains it as being made up
of two elements: ‘Independence of mind’ and ‘independence of appearance’. The former is
still defined to include integrity, objectivity and scepticism. The latter is defined as being
free from ‘facts and circumstances’ that would lead a reasonable and informed third party
to conclude that integrity, objectivity or scepticism was compromised.
This has been the extant definition for a number of years which perhaps explains why
auditor independence is now largely viewed through the lens of compliance, with detailed
rules to be followed rather than a more principles based threats and safeguards approach.
Indeed, in contrast to what the 1987 document suggests, independence is now something
that is only really a relevant consideration for an auditor or assurance provider, with the rest
of profession concerned with objectivity.

Practical application

As indicated above, independence has very much become a matter of regulatory

compliance, where a checklist approach such as that illustrated below tends to be adopted
to ensure that the auditor is free from (or at least manages) a prescribed list of
circumstances under which independence is perceived to be compromised. The approach to
auditor independence has increasingly become rules based rather than principles based.

Objectivity, on the other hand, is much more concerned with reasons and motivations
behind certain decisions or behaviour. It is concerned with internal thought processes rather
than lists of prohibitions. As such a framework such as the ICAEW framework for
resolving ethical problems is more suitable for assessing objectivity than a checklist.

If we take the IESBA definition of independence, and regard objectivity and ‘independence
of mind’ to be closely aligned (as was explicitly stated in early Guides to Professional
Ethics) it stands to reason that both of the tools above are necessary to fully assess auditor
independence.

Example of auditor independence checklist approach

(this is an example of an approach that has been adopted by some. It is not intended to be
an exhaustive independence checklist and should not be treated as such).

 Do staff have any direct/indirect financial interests in the audited entity? (290.102)
 Do any partners or staff have personal, family or business relationships with officers or
employees of the audited entity? (290.123 – 290.131)
 Is there actual/threatened litigation between the firm and the audited entity? (290.228)
 Have any staff received non-trivial gifts or hospitality from the audited entity or its staff?
(290.227)
 Are there any urgent reporting deadlines that may lead to resourcing issues and pressure
from the management of the audited entity?
 Does the audited entity have informed management? (290.163)
 Has the audit fee exceeded 15% of the firm’s income for two consecutive years? (290.217)
 Are there significant overdue fees from the audited entity? (290.220)
 Is the firm adequately resourced to perform the audit?
Example scenarios

The scenarios below illustrate the distinction (and interaction) between the concepts of
independence and objectivity as defined by the IESBA Code of Ethics.

Scenario 1

Phedra is an audit manager for a medium sized accounting firm. She has recently
taken on a new engagement auditing Theseus plc, the parent company of a tech
group. She is always diligent in her work and has proven very skilled in identifying
and dealing with ethical threats appropriately. Her father in law recently passed
away. Her husband’s inheritance includes a small shareholding in Theseus plc.
Phedra is unaware of the existence of this shareholding.

Is Phedra

a) Objective
b) Independent
c) Neither
d) Both?

Falta por traducer

Scenario 2

Geralt is a senior manager auditing Velen plc. Velen is a diverse group with
activities ranging from pharmaceuticals to food products. This is his first year on
this audit. He does not have any direct or indirect financial interests in the Velen
group, nor do any of his family or friends work for Velen.

During the course of the audit Geralt discovers practices within the pharmaceuticals
division that upset him, since he doesn’t agree with testing on animals. He then
becomes more challenging of the Directors and goes out of his way to find
problems, no matter how material, with the divisional accounts and controls.

Is Geralt

a) Objective
b) Independent
c) Neither
d) Both?

Scenario 3
Kim works as an audit manager for a small firm. The firm has just taken on the audit of
Dynamo Co, a small marketing company, and he has been selected to manage the
engagement.

Kim has no prior association with Dynamo or its employees, and no direct or indirect
financial interests. During the audit he is diligent and sceptical but ultimately finds no real
issues. On the final day before signing off the accounts the Finance Director invites Kim for
lunch at a local, family run restaurant. He accepts.

Is Kim

a) Objective
b) Independent
c) Neither
d) Both?

Country comparisons

Auditor independence is, however, often an issue that finds its way into domestic
legislation, and some countries take a slightly different (in some cases entirely rules based)
approach. The different approach taken by countries to independence is illustrated in the
following examples.

The UK FRC Ethical Standard defines independence as ‘freedom from conditions and
relationships which, in the context of an engagement, would compromise the integrity or
objectivity of the firm or covered persons’ (paragraph I23). It is described as underpinning
objectivity but sufficiently distinct from it being concerned with the circumstances
surrounding the relationship rather than the auditor’s state of mind.

This approach to independence is therefore very much more concerned with ‘independence
of appearance’ rather than ‘independence of mind’, with a number of detailed regulatory
requirements designed to ensure the former.

In Japan, independence requirements derive from the Japanese Institute of Certified Public
Accountants (JICPA) Code and statute. They lay out detailed rules concerning financial
interests, personal interests, scope of non-audit services and rotation of audit partners. The
JICPA supplements this with some self-regulatory provisions however overall compliance
is assessed by reference to a rules based approach.

The Swedish Auditors Act requires auditors to be independent, but the approach is very
different and is much more principles based. The Act requires auditors to carry out a threats
and safeguards analysis such that sufficient measures are taken to ensure that independence
would not be questioned. There are five absolute prohibitions, far fewer than in the
regulations of many other countries. The approach to auditor independence is therefore
largely achieved through a principles based framework.

INDEPENDENCIA V OBJETIVIDAD: ¿CUÁL ES LA DIFERENCIA?

https://www.icaew.com/international-accounting-and-auditing/international-standards-
ethics/ethics-introduction-and-fundamentals/independence-v-objectivity-what-is-the-difference

Aquí buscamos distinguir la diferencia entre los dos conceptos éticos de independencia y
objetividad.

Estos conceptos éticos siempre han disfrutado de un elemento de interacción. En la Guía de ética
profesional de 1987 de ICAEW (ahora conocida como el Código de ética), la Declaración sobre la
independencia profesional lo describió como un "concepto fundamental para la profesión
contable" y "una actitud mental caracterizada por la integridad y un enfoque objetivo". Esto
explica claramente la objetividad como parte de la independencia.

En la Declaración 1.201 de la Guía de Ética Profesional de 1997 de ICAEW sobre Integridad,

Objetividad e Independencia se refería a la Objetividad como "independencia de ánimo".

Otros comentarios más recientes sobre la interacción han incluido la independencia que se
considera como "una medida de objetividad", o la independencia "que permite" una conclusión
objetiva. Como podemos ver, hay un elemento de circularidad aquí.

Aquí presentamos un análisis de las definiciones actuales, proporcionamos algunas ilustraciones

prácticas de cómo interactúan actualmente y compartimos los pensamientos de ICAEW sobre la
independencia, llamando la atención sobre el marco basado en principios de ICAEW para resolver
problemas éticos.

Definiciones y requisitos actuales

En el actual Código de Ética de IESBA 120.1 Objetividad ‘impone a todos los contadores
profesionales la obligación de no comprometer su juicio profesional o comercial debido a
prejuicios, conflictos de intereses o la influencia indebida de otros '.

La definición actual de Independencia del Código de Ética del IESBA lo explica como compuesto
por dos elementos: "Independencia de la mente" e "independencia de la apariencia". El primero
todavía se define para incluir integridad, objetividad y escepticismo. Este último se define como
estar libre de "hechos y circunstancias" que llevarían a un tercero razonable e informado a concluir
que la integridad, la objetividad o el escepticismo se vieron comprometidos.

Esta ha sido la definición existente durante varios años, lo que quizás explica por qué la
independencia del auditor ahora se ve en gran medida a través de la lente del cumplimiento, con
reglas detalladas a seguir en lugar de un enfoque de amenazas y salvaguardas más basado en
principios. De hecho, en contraste con lo que sugiere el documento de 1987, la independencia es
ahora algo que solo es realmente una consideración relevante para un auditor o proveedor de
aseguramiento, con el resto de la profesión preocupado por la objetividad.

Aplicación práctica

Como se indicó anteriormente, la independencia se ha convertido en una cuestión de

cumplimiento normativo, donde un enfoque de lista de verificación como el que se ilustra a
continuación tiende a adoptarse para garantizar que el auditor esté libre (o al menos gestione) una
lista prescrita de circunstancias bajo las cuales la independencia se percibe como comprometido.
El enfoque de la independencia del auditor se ha convertido cada vez más en reglas basadas en
principios.

La objetividad, por otro lado, está mucho más preocupada por las razones y motivaciones detrás
de ciertas decisiones o comportamientos. Se ocupa de los procesos de pensamiento internos en
lugar de las listas de prohibiciones. Como tal marco, como el marco ICAEW para resolver
problemas éticos, es más adecuado para evaluar la objetividad que una lista de verificación.

Si tomamos la definición de independencia del IESBA y consideramos que la objetividad y la

"independencia de la mente" están estrechamente alineadas (como se indicó explícitamente en
las primeras Guías de ética profesional), es lógico que ambas herramientas anteriores sean
necesarias para evaluar completamente al auditor independencia.

Ejemplo de enfoque de lista de verificación de independencia del auditor

(Este es un ejemplo de un enfoque que han adoptado algunos. No pretende ser una lista
exhaustiva de verificación de independencia y no debe tratarse como tal).

• ¿El personal tiene algún interés financiero directo / indirecto en la entidad auditada? (290.102)

• ¿Algún socio o personal tiene relaciones personales, familiares o comerciales con funcionarios o
empleados de la entidad auditada? (290.123 - 290.131)

• ¿Existe un litigio real / amenazado entre la empresa y la entidad auditada? (290.228)

• ¿Algún personal ha recibido obsequios u hospitalidad no triviales de la entidad auditada o su

personal? (290.227)

• ¿Existen plazos de presentación de informes urgentes que puedan generar problemas de

recursos y presión por parte de la administración de la entidad auditada?

• ¿La entidad auditada tiene una gestión informada? (290.163)

• ¿La tarifa de auditoría excedió el 15% de los ingresos de la empresa durante dos años
consecutivos? (290.217)

• ¿Hay tarifas significativas vencidas de la entidad auditada? (290.220)

• ¿La empresa cuenta con los recursos adecuados para realizar la auditoría?

Escenarios de ejemplo
Los escenarios a continuación ilustran la distinción (e interacción) entre los conceptos de
independencia y objetividad definidos por el Código de Ética del IESBA.

escenario 1

Phedra es gerente de auditoría para una firma de contabilidad de tamaño mediano.

Recientemente asumió un nuevo compromiso de auditoría de Theseus plc, la empresa matriz de
un grupo tecnológico. Siempre es diligente en su trabajo y ha demostrado ser muy hábil para
identificar y enfrentar las amenazas éticas de manera adecuada. Su suegro falleció recientemente.
La herencia de su esposo incluye una pequeña participación en Theseus plc. Phedra desconoce la
existencia de esta participación.

Es efedra

a) Objetivo

b) Independiente

c) Ninguno

d) ¿Ambos?