Auditor Liability

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Limiting recovery of loss has a detrimental effect on those which are harmed by alleged negligence. The cost of liability is reasonable when compared to total revenues, and in light of a CPA's public responsibility. Indemnity insurance spreads risk in the aggregate therefore removing the element of risk at the firm level. The threat of litigation provides public accountants with a deterrent against negligent work. Finally, the results of lawsuits cause the profession itself to implement new standards. (Bolinger p.54)
The AICPA and its supporters have developed their argument based on continued liability's likely effect on the profession as well as an economic argument. The arguments in favor of liability reform include the effect of continued liability on the availability of CPA services. The likelihood of fee increases resulting from liability risk. The threat of the inability of public accounting to obtain and retain qualified individuals. (Bolinger p.56) Finally, the ...

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was deemed credit-worthy ultimately failed, and claim resulted by the third party against the bank issuing the certificate.!
(Minnis p.9) The finding in the
The notion that all parties remotely affected by a given action (or lack thereof) deserve compensation for their loss is one which is embraced by the legal community-- and rightfully so, after all a drastic reduction in the number of claims filed would result otherwise. The argument made in its favor is that all those harmed by negligent activity deserve compensation. Idealistically this is true, and theoretically anyone who makes a decision based entirely on the results of an auditor's report, and suffers a loss due to ...

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