Contributing 

What are the auditors liabilities?

Leia Doyle

What are the auditors liabilities?

Under the ordinary law of contract, an auditor of a company or of any other sort of organisation has a duty t- use reasonable skill and diligence in carrying out his work. If he fails to do so, he will be negligent. If his negligence leads to loss by his client then he will be liable to make good the loss.

What are the responsibility and liability of auditors?

The auditor has a duty to employ such skill with reasonable care and diligence. The auditor undertakes his task(s) with good faith and integrity but is not infallible. The auditor may be liable for negligence, bad faith, or dishonesty, but not for mere errors in judgment.

Are auditors liable?

Auditors are potentially liable for both criminal and civil offences. The former occur when individuals or organisations breach a government imposed law; in other words criminal law governs relationships between entities and the state.

What are the liabilities of auditor on negligence?

The liability of an auditor arises where it is proved that his client has suffered a loss due to his professional negligence. The auditor may be held personally liable, if it is proved, that had he exercised reasonable care and skill, he must have discovered the discrepancy.

Can auditors be prosecuted?

We think this guidance needs to make it very clear that auditors who have made honest mistakes should not be prosecuted, and have offered to work closely with the Government in developing this guidance to ensure that the unintended consequences are avoided.

Who can sue auditors?

Four elements of negligence must be established to sue an auditor:

  • There is a legal duty of care to the plaintiff.
  • There is a breach in that duty.
  • Damages resulted.
  • There is a connection between the breach of duty and the resulting damage.

    What are the examples of audit evidence?

    Examples of auditing evidence include bank accounts, management accounts, payrolls, bank statements, invoices, and receipts. Good auditing evidence should be sufficient, reliable, provided from an appropriate source, and relevant to the audit at hand.