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The independence of auditors is regarded as key to their credibility as external verifiers of external financial statements. The requirement for external auditors to be independent of their clients when undertaking an audit is enshrined in the International Federation of Accountants' (IFAC) Code of Ethics and in the European Union's Eighth Directive. In the IFAC code this requirement is translated into various situations where observance of certain rules should ensure independence. As the countries of Central Europe and the former Soviet Union have drafted and implemented new laws on external audit, some of these auditor independence rules have been included in the new laws and codes of professional practice. Yet the rationale for the inclusion of these rules is not always clear, particularly given the different cultural and business contexts. In this paper, the authors have identified the auditor independence rule requirements that have been implemented into the laws and codes of practice in Russia. These requirements are then analysed against the economic, social and historic background in Russia, based to a large extent on interviews with auditors, enterprise management and users of financial statements, to generate questions about the efficacy of the auditor independence rules. This should provide relevant input to international and national bodies concerned with the drafting of rules relating to auditor independence in countries with different social and economic traditions.

A notion of auditor independence, envisaged as crucial to the credibility of the audit function, resides in professional Codes of Ethics in much of the western world. Since the beginning of the 1990s, the auditor independence construct has been imported eastwards and incorporated into legislation and Code of Practices amongst central and eastern European economies (CEE), together with other requirements, as the countries prepare for their accession to the European Union. This study is aimed at ascertaining the meanings conveyed by the auditor independence construct and its state of realisation in one of the transition economies of the CEE region, the Czech Republic. Also, the study seeks to understand how local culture impacts upon a particular understanding of auditor independence. In order to examine the auditor independence in this part of the world, a framework for analysis incorporating structural conditions, local traditions and culture is proposed. The analysis is conducted first de jure, and is based upon a review of the Czech law and professional regulation. This is complemented with a de facto analysis based upon interviews with audit practitioners, regulators and financial statement users in the Czech Republic and on a review of Czech media coverage. What emerges from the study is a particular local understanding of the auditor independence construct, perceived primarily as an economic concept in the context of market instability and the immature legal framework. It appears that there is a tendency to follow the form of audit procedures without substantial rationalisation. We conclude that socio-economic and cultural pressures appear to far outweigh any formal safeguards implemented to maintain professional integrity and competence in the CEE region.

The paper draws on the organizational change literature in order to provide a theoretical framework for the post-Velvet Revolution changes in Czech accounting. The former system is modelled as an amalgam of interpretive schemes, design archetypes and subsystems. The former system is seen as coherent except in the area of audit. The points of change are economic and political disturbances which result in legal and institutional changes in accounting and auditing. In terms of the theory, these are the design archetypes of the new organization of accounting. Identifying ambiguities and contradictions, we argue that the new organization is on an unresolved excursion towards a new model. We also argue that although the change is of a second-order nature, it has been carried out with relatively little public discussion or participation.