Independence
(a) External auditor independence
External auditors are unable to fulfil their duties to shareholders if they are not independent of the entity on which they are reporting.
If external auditors have an interest in the financial statements on which they are reporting, they may not be objective. For example, if they have prepared the financial statements on which they are reporting, their view may not be considered objective.
If they have financial or employment connections with the company on which they are reporting they will not be objective.
If they provide a significant level of additional services to the entity, some argue that they cannot report objectively as auditors to shareholders.

(b) Advantages and disadvantages of external auditors providing consulting services
The principal advantage of providing consulting services lies in the fact that auditors are best placed to provide such services, because they have an intimate knowledge of the operations of the company.
Equally, if they provide consulting services, the knowledge so obtained will be useful in conducting the audit, and experience in general of consulting better enables auditors to conduct their duties as auditors, because knowledge of other industries can be brought to bear on the client.
The principal disadvantage is that auditors often make a lot of money from such work, and it is argued that auditors are not objective in these circumstances because they would be unwilling to challenge directors or issue a modified auditor’s report for fear of losing the fees for consulting work.
The other disadvantage is that if they have implemented systems that produce the financial statements, they are unlikely to give a modified auditor report on the information that those systems produce.