THE IMPORTANCE OF USING A SYSTEM OF INDICATORS TO ASSESS CONFLICTS OF INTEREST IN AUDITING ACTIVITIE

Abstract

Conflicts of interest represent one of the most significant threats to the independence and objectivity of auditors. When auditors maintain economic, social, or administrative ties with their clients, the credibility of audit results can be compromised. This study proposes a quantitative system of indicators to identify and assess conflicts of interest in auditing activities. The system includes six key indicators-Financial Dependence Level (FDL), Personal Relationship Index (PRI), Audit Duration Coefficient (ADC), Bonus/Reward Dependence (BRD), Independent Reviewer Difference (IRD), and Audit Leadership Rotation (ALR)-each weighted according to its influence on auditor independence. Using these indicators, a Composite Index (CI) is calculated to classify organizations into low, medium, or high conflict-of-interest risk levels. The results of the analysis conducted across several organizations in Uzbekistan show significant variation in risk levels, with some entities, such as Navoi Construction, exhibiting high risk due to prolonged engagement and strong financial dependencies. The proposed indicator system enhances the transparency of the audit process and serves as an effective tool for early detection and prevention of auditor bias.