Auditor independence as prerequisite of external audit efficiency

External audit plays an extremely important role in increasing credibility and usefulness of financial statements. In fact, users of financial statements expect that auditors as independent and qualified persons increase the quality of financial statements and consequently their usefulness in the process of decision making. Numerous corporate scandals that have occurred in the USA but also in European countries have initiated questions about audit usefulness and have additionally encouraged debate on issues of audit independence. Independence of external auditors is crucial in ensuring the reliability and credibility of financial information and together with professional ethic of auditors presents the basis of audit profession. Through this paper authors discuss the issue of auditor independence as well as the challenges and threats to independence that are auditors faced with when they perform audit in the modern business environment.