In auditing, what is a key factor that can affect the auditor's independence?

A key factor affecting the auditor's independence is shared financial interests with the client. This situation poses a threat to independence because when an auditor has a financial stake in the client's success, their objectivity might be compromised. A financial interest could lead an auditor to make decisions that favor the client, rather than uphold the integrity of the audit process. For example, if an auditor owns stock in the client company or has a monetary arrangement that could benefit from favorable audit results, their impartiality might be questioned by stakeholders.

Understanding the importance of independence is vital for auditors, as it serves as the cornerstone of the auditing profession. Maintaining independence ensures that auditors can provide unbiased assessments of financial statements, which is crucial for stakeholders relying on those audits for accurate information regarding the client's financial position.