Separating internal and external audits of a company eliminates conflict of interest. The independence of auditors provides companies with confidence on their performance. In order to build trust and honesty, independent external audits avoid interest or obligation from the client, management or owners. However, despite the regulation, auditor independence has been elusive in the United States. This is due to the clients’ indulgence in the auditors work. There is a shift from the moral aspect of auditing to technically legal issues. This scenario presents an inaccurate image of a firm. Separating internal and external audits reinforces the fundamental auditing principles such as integrity, honesty, objectivity, competence, and confidentiality (Zabihollah, 2003).
Studies demonstrate the perception of inappropriateness in a situation where the audit client and external auditor have a close relationship. In such a case, there emerges a conflict of interest that can impair independence, hence compromising the credibility of the audit outcomes. The Bible advocates for Christian values, like integrity (Deuteronomy 6: 18), which are building competence in an organization. Righteous organizations go beyond the law and inculcate morality by entrenching accountability and transparency in dealing with the company’s fiscal matters. The Babylonian Talmud requires individuals to go beyond the law and even return lost item to owners. Businesses should embrace this principle in auditing by engaging an external, independent auditor to reveal the real financial position, even if it means declaring a loss (Coolidge, 1996).
In conclusion, it is vital to have a regulation of independent, internal and external auditing to strengthen corporate reporting. Babylonian Talmud, Avot 1: 14, the Sage Hillel’s philosophy underscores business ethics. An organization must attain its goals, like profits, but the priority is also to adhere to the principles of honesty and competence. Therefore, independent auditing creates transparency, which matches the biblical principles or code of ethics, thus creating a balance between business stability and cohesiveness in a society.