Impact of the External/Internal Auditing Dual Role on Public Accounting Firms' Independence

The purpose of this paper is to examine the impact of the simultaneous dual practice of internal and external auditing by accounting firms. This impact is restricted to accounting firms' independence in the light of Australian Auditing Standards and Statements of Auditing Practice in addition to Australian Code of Professional Conduct and Rules of Ethical Conduct. The results of this study suggest that the internal/external dual role is incompatible and could result in conflict of interest. This incompatibility is based on the effect of the internal/external auditing dual role on the criterion of independence. This criterion is professionally and legally recognised as the prime requirements for external auditing.