Auditors often earn considerable fees from a company for examining (auditing) its financial statements. In addition, it’s not uncommon for auditors to earn additional fees from the company by providing consulting, tax, and other advisory services.

Required:

1. Which party has primary responsibility—auditors or company executives—for properly applying accounting standards when communicating with investors and creditors through financial statements?

2. Are auditors considered employees of the company?

3. Does the fact that clients compensate auditors for providing audits and other consulting services have the potential to jeopardize an auditor’s independence?

4. What pressures on a typical audit engagement might affect an auditor’s independence?