Question

There is no agreement internationally on how to address the issue of auditor liability.

Required:

Describe the approach taken in your own country (US) in addressing the issue of auditor liability and explain the rationale behind that approach.

Answer 1

Answer)

Auditor liability to the client and third property users is derived from following law:

1)contract law:

In case of breach of contract by the auditor then he is tend to be liable.Breach of contract may be due to breaking the agreement without full filling it completely,not performing the audit using relevant auditing standards etc.

2) common law:It can be due to negligence of auditor or fraud etc leads to liability of auditor.

3)Statutory law: Not performing the audit as required by statute leads to It.

Punishments or penalties:

1) temporarily or permanent revocation of firm registration.

2) Fine up to $750000 per violation.

3)Require continuing the education of firm personal.

The rationale behind the approach is very simple.The audior must work with due care and at the same time he must not give trouble for the client and conduct audit in accordance with Statutory requirements.

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