Final answer:
Accountants must discuss their independence with the audit committee and confirm in writing their independence from the audit client under the Sarbanes-Oxley Act to protect investors from accounting fraud.
Step-by-step explanation:
Within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, to be deemed as independent with regard to a specific entity, an accountant must meet specific requirements. These requirements have evolved, particularly with the enactment of the Sarbanes-Oxley Act in 2002, which was a legislative response to major accounting scandals involving corporations such as Enron and WorldCom. This act increased strictness in defining independence to protect investors from accounting fraud.
One of the contemporary requirements for an accountant to be considered independent is to discuss its independence with the audit committee. This is a group responsible for oversight of the financial reporting and disclosure process. Accountants are also required to confirm their independence from the audit client, which means that they must evaluate and disclose any personal or professional relationships that could be perceived as compromising their objectivity and impartiality.
The board of directors and outside investors also play a crucial role in corporate governance. However, as seen in the case of Lehann Brothers, failures in these areas can lead to inadequate financial disclosure, highlighting the necessity of true independence in the auditing process.