Auditor's independence is playing vital role in today's scenario of financial accounting. An auditor should neither favor the client nor promote his own interest while performing his duty. This article talks about the importance of auditor's independence and factors affecting it. A few cases of audit failure in the context of Enron and WorldCom are also mentioned.

Auditor's independence has been a topic of much discussion in recent years. Such independence is required to ensure high quality financial reporting. The users of financial statements, namely, the creditors, private investors, government, employees and stakeholders recognized that managers could have various motives to manipulate financial information and therefore require auditor's connivance. In providing the authentic information through audit report, the auditor may go against the interest of the management and may fall pray to the directors' hit list. This is so because virtually shareholders appoint the auditor to look after their interest but practically the auditor is appointed by the Board of Directors (BODs) i.e., shareholders approve, the appointment of the auditor with the consent of the directors.

If the auditor fails to satisfy the interest of the directors by presenting true and fair financial statements, directors may not consent to the auditor's reappointment. That is why independence of auditor becomes a crucial issue. The purpose of the article is to find out factors affecting auditor's independence and to adopt measures to safeguard independence in audit practice. The motivation of the study comes from an unresolved conflict of interest between the management and the auditor which hampers auditor's independence.

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