How is independence defined in an auditing context?

In an auditing context, independence is fundamentally about maintaining the integrity and objectivity of the audit process. The definition of independence focuses on freedom from relationships that could compromise an auditor's ability to make impartial judgments. This concept is critical because an auditor must provide an unbiased opinion on the financial statements of a client. If an auditor has personal or financial relationships with the client, it could influence their opinions or findings, leading to possible conflicts of interest and undermining the reliability of the audit.

The other choices reflect certain aspects related to an auditor's conduct but do not encapsulate the core definition of independence as effectively. While the absence of financial interests in a client is important and aligns with independence, it does not cover all the relationships that could potentially impact objectivity. Similarly, disclosing potential conflicts of interest is an important practice in auditing, but it does not inherently ensure independence; an auditor could disclose all conflicts yet still have relationships that impair independence. Working closely with clients without restrictions is contrary to the principle of independence, as such proximity may lead to biases. Thus, the definition focusing on the freedom from compromising relationships is the most comprehensive and accurate representation of independence in auditing.