Assignment 2-3 Auditor’s Legal Liability to Third Parties

Assignment 2-3 Auditor’s Legal Liability to Third Parties

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ACCT470-V2WW January 21, 2012 Auditor’s Legal Liability to Third Parties Assignment 2-3 Chapter 20 20-5. Distinguish among the four standards that have evolved for defining auditor’s liability for ordinary negligence to third parties under common law. Why is this area of auditor’s liability so complex? The four legal standards that have evolved for defining auditor’s liability for ordinary negligence to third parties under common law are: (1) privity- the most restrictive view under common law is that auditors have no liability for ordinary negligence to third parties who do not have a privity relationship with the auditor. ( privity means that a contract or a specific agreement exists between two parties ). (2) near privity - does not require strict privity of contract, but that the third party be known to the auditor and that the auditor has directly conveyed the audit report or acted to induce reliance on the audit report. (3) Foreseen third parties - Many courts have reexamined the privity notion and substituted the
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/29/2012 for the course ACCOUNTING 470 taught by Professor Kwong during the Spring '11 term at Franklin.

Page1 / 2

Assignment 2-3 Auditor’s Legal Liability to Third Parties

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online