Professional Negligence And Legal Liabilities Of Auditors
- IJLLR Journal
- Oct 9
- 1 min read
Sakshi Shah, LL.B. Student at Jitendra Chauhan College of Law, University of Mumbai.
ABSTRACT
Auditors are the cornerstone in shaping the trust that the users have on the financial statements. Audit is generally beneficial to the shareholders, government, lenders, or creditors, who are the end users of the financial statement. Considering this the auditor should keep in mind that it is their duty to adhere to the set standards of auditing and accounting. Key regulatory authorities and statutes governing the statutory framework of auditors in India generally includes the Institute of Chartered Accountants of India (ICAI), the Securities and Exchange Board of India (SEBI), and the Companies Act, 2013. With these professional responsibilities come inherent liabilities, which are mainly categorized into civil and criminal liability.
This paper examines auditor liability in context of professional negligence, or any professional misconduct that demonstrates incompetence in discharge of the duties by an auditor. It further considers, if the auditors have any liability towards the third parties. A comparative analysis highlights the differences in statutory framework, sources of liability, and the extent of auditor’s accountability across various jurisdiction like India, UK, and USA. The study concludes that an auditor must uphold independence, professional competence, and ethical standards while exercising due care and complying with the regulatory framework, thereby it may minimize the legal risks and maintain the users trust in financial reporting.
Keywords: Auditor liability, Professional negligence, Civil and criminal liability, Financial reporting.
