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This approach states that the auditor has liability under ordinary negligence if the third party is known to be using the financial statements and there has been some sort of direct communication between the two parties. [12] An example could be the auditor directly giving a report to the bank that will be providing the loan for an actual client.
External Auditors' Liability to Third Parties . Auditors may be liable to 3rd parties who are damaged by making decisions based on information in audited reports. This risk of auditors' liability to third parties is limited by the doctrine of privity. An investor or creditor, for instance, can not generally sue an auditor for giving a favorable ...
Stern declared bankruptcy in 1925. Ultramares sued Touche Niven for the amount of the Stern debt, declaring that a careful audit would have shown Stern to be insolvent. The audit was found to be negligent, but not fraudulent. The judge set this finding aside based on the doctrine of privity, which protects auditors from third party suits.
An Act to amend the law relating to company auditors and accounts, to the provision that may be made in respect of certain liabilities incurred by a company’s officers, and to company investigations; to make provision for community interest companies; and for connected purposes. Citation: 2004 c 27: Territorial extent
These standards, often referred to as Generally Accepted Government Auditing Standards (GAGAS), are to be followed by auditors and audit organizations when required by law, regulation, agreement, contract, or policy. These standards pertain to auditors' professional qualifications, the quality of audit effort, and the characteristics of ...
Accountant at work. In the Commonwealth of Nations, which include the United Kingdom, Canada, Australia, New Zealand, Hong Kong pre-1997, and several other states, commonly recognised accounting qualifications are Chartered Certified Accountant (), Chartered Accountant (CA or ACA), Certified Management Accountant (Institute of Certified Management Accountants) (CMA), Chartered Management ...
Business firms use a financial analysis technique called asset vs. liability management (ALM) to mitigate risk due to a mismatch in their assets and liabilities. A mismatch occurs when assets and ...
At the Ontario Superior Court of Justice, Deloitte was held to have been negligent, and Gans J awarded damages totalling $84,750,000 to Livent.In so doing, he observed that the standard of care is based on the profession's generally accepted auditing standards, and that the current state of Canadian jurisprudence concerning an auditor's duty can be expressed as follows: [8]