Auditor’s Liabilities

Auditors collect sufficient appropriate audit evidence to provide their opinion on a subject matter. Based on this opinion, users can make various decisions. Therefore, auditors must consider the trust users put in their work. If auditors fail to perform their tasks effectively, they may face legal repercussions. These fall under an auditor’s liabilities.

What are an Auditor’s Liabilities?

An auditor’s liabilities include any obligations that auditors face from their work. Due to various high-profile corporate failures, imposing these obligations have become crucial. Usually, an auditor’s liabilities relate to the risks involved during audit work. These may include inherent, control, and detection risks. Auditor’s liabilities also concern the audit evidence collected during audit engagements.

Add your business to our business directory https://harbourfronts.com/directory/ Add your business. Also check out other businesses in the directory

An auditor’s liabilities include any legal repercussions that stem from their work. When performing audits, auditors assume these liabilities. Some of these liabilities may come from their profession, while others relate to their obligations toward users and other stakeholders. However, auditors can reduce the chances of these liabilities materializing by ensuring the quality of their work.

What are the types of Auditor’s Liabilities?

An auditor’s liabilities may differ from one jurisdiction to another. On top of that, it may also vary based on the type of audit assignment. Usually, the liability for negligence and contracts may apply to every audit engagement. Auditors may also have other duties which can impose these liabilities, which can fall under the following types.

Civil offenses

Auditors have several obligations to their clients and third parties. Any liabilities that come from these obligations fall under civil offenses. Usually, they fall under the law of tort and contract law. It is also where the liability for negligence exists. The law of tort allows clients and third parties to sue auditors for any negligence during their work.

On top of that, contract law allows parties to hold auditors liable for any breaches of contract. Therefore, if auditors fail to fulfill their contractual rights, shareholders and other parties can sue them. The duties of auditors and the client are usually a part of the audit engagement letter signed by the client beforehand.

Criminal offenses

Most of an auditor’s liabilities fall under civil offenses. However, it does not conclude all the obligations auditors have. As mentioned above, every jurisdiction has laws and regulations for the auditing profession. Usually, these fall under the Companies Act of the country where an auditor operates. These may include provisions for insider trading, non-compliance, falsification of reports, etc.

Criminal offenses are more strict than civil ones. In the case of these offenses, auditors can be persecuted in criminal court. In this case, the auditors will deal with governance bodies rather than the client or its stakeholders.

What is the Disclaimer of Auditor’s Liability?

Auditors can disclaim some liability as a part of their work. However, they must have mentioned this in the contract with the client beforehand. In these cases, auditors can present the agreement as evidence of not being liable. Nonetheless, disclaimers may have limited scope. On top of that, disclaiming liability cannot help auditors in case of criminal offenses.

Conclusion

Auditors have various duties toward other parties that they must consider during their work. These duties can give rise to liabilities for the auditor. Usually, they fall into two types, including civil and criminal offenses. Auditors can also use a disclaimer to limit or reduce their liabilities. However, these may not be effective every time.

Further questions

What's your question? Ask it in the discussion forum

Have an answer to the questions below? Post it here or in the forum

LATEST NEWSStock market news live updates: Stocks slide after jobs report shocks, Big Tech results disappoint
Stock market news live updates: Stocks slide after jobs report shocks, Big Tech results disappoint
Stay up-to-date with the latest news - click here
LATEST NEWSHere’s where the jobs are for January 2023 — in one chart
Here’s where the jobs are for January 2023 — in one chart

Leisure and hospitality saw an increase of 128,000 jobs in the month, led by 99,000 jobs in restaurants and bars alone.

Stay up-to-date with the latest news - click here
LATEST NEWSStocks Slip After January Jobs Report
Stocks Slip After January Jobs Report

Markets were on course to end the week on a downcast note after disappointing results from Apple, Amazon and Alphabet.

Stay up-to-date with the latest news - click here
LATEST NEWSBig Tech earnings face more heat as cloud cover fades
Big Tech earnings face more heat as cloud cover fades
Stay up-to-date with the latest news - click here
LATEST NEWSOil down 7% on week as dollar rockets on U.S. jobs report
Oil down 7% on week as dollar rockets on U.S. jobs report
Stay up-to-date with the latest news - click here

Leave a Reply