Auditor independence is an important facor in establishing the credibility of the audit opinion.
However, independence is a state of mind and it is not always possible to distinguish, in practical situations, between the two categories of independence. Independence may be addressed by, for instance, the audit firm having a policy prohibiting the holding of shares in, or the acting as a director of, client companies. This would, for example, require an auditor to relinquish the audit of a company which engaged a former partner as a director.