Liability of Auditors and Accountants



Liability of Auditors and Accountants

Introduction

In the modern world of today, the auditors, as well as, the accountants have played a vital role in the enhancement of the corporate governance of the companies. They have also helped in the establishment of the confidence for the users of the financial reports of the company, especially the confidence of the investors. However, there have been many incidents in which the negligence of the auditors or their fraudulent activities have affected the company and has included many companies in massive scandals. Such fraudulent activities have become known and have been unveiled which has proven that the legal liabilities of the auditors and the accountants become a cause of disagreement in all of the countries and firms. There have been a number of complaints that have been lodged against many auditors, as well as, accountants by the parties that have been affected by such fraudulent activities. Therefore, it becomes necessary for the accountants and the auditors to know and understand their legal duties, so that they can perform their duties in a better way. It has also been found that most of the time the companies also do not have any idea about what the legal responsibilities and duties of the accountants and the auditors are. There have also been cases in which the users of the financial reports over expect the duties of the auditors of the firm. They also do not have any idea about the legal responsibilities of the auditors. Therefore, it becomes necessary for the users of the financial statements to have a basic idea about what the auditors' duties and responsibilities are.

Discussion

Professional Negligence

Professional negligence comes under the general rules that are present for negligence that cover the situation in which the defendant presents himself as having more abilities and skills than average. The duty of care is owed to the claimant by the defendant when it is established that the defendant has breached a code of his duty. The most basic test of breach is addressing the question that whether the defendant has or has not matched the abilities and skills of a reasonable person. The fact that the professionals offer, as well as, supply services that are more than the average people and their abilities and skills, they also need to be careful about their duties. The rules also define and provide a set ...