Auditors and Legal Liability

Auditors and Legal Liability
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AUDIT ASSURANCE AND COMPLIANCE
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Auditors and Legal Liability
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Exective summary
The paper focuses on providing an analysis of the role of auditors and their legal liability. Over
the years, the audit profession has been facing an increase in litigations and liabilities; this is
highly costing the occupation, over billions of pounds. There have been several cases in court
were auditor firms, had been penalized for their negligence, fraud, misrepresentation of
information, especially those involving third parties. This has reduced competition among the
auditing firms because small firms will be shunning large listed companies because of the
potential risks and costs involved in auditing them. Within the auditing profession, auditors can
make all the endeavors to reduce the litigation and penalty rate since that for so long has affected
the industry. The high litigation and penalty rate for years have been a preventative measure to
competition among the acting firms, and one way or the other has affected and damaged the
capital market of the industry.

Auditors and Legal Liability
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Table of Contents
Introduction......................................................................................................................................3
Body.................................................................................................................................................3
Description of Key events and factual issues which were behind the Royal Bank of Scotland
(RBS) Vs. Bannerman Johnston MacLay and others......................................................................4
The parties which were responsible and reasons why.....................................................................5
The relevant issues raised in Accounting and Auditing by case.....................................................5
The root cause of the problems........................................................................................................6
Mistakes and misrepresentations which were carried out by defendants during the session of the
court, thus contributing to awarding of the damages.......................................................................7
Recommendations to the Auditing Strategy and Auditing program as well as other effective
measures..........................................................................................................................................7
Conclusion.......................................................................................................................................8
Bibliography....................................................................................................................................9

Auditors and Legal Liability
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Introduction
The critical responsibility performed by the auditor is to offer reasonable assurance to financial
statement users that information presented on that statement is free form errors and right.
Therefore, something which causes a barrier to this purpose as performed by auditors becomes a
professional liability to them. The case under study is from the United Kingdom. Auditors
within society are responsible for providing assurance services. Therefore, investors within the
public view them as the guarantor of investment corporations (Marianne 2009). Auditors should
always be alert in ways they are offering their services (Samsonova-Taddei & Siddiqui 2016.).
This is because auditors are still prosecutable in the criminal court for matters concerning them
being reckless or knowingly issue an inappropriate audit opinion (Humphrey 2013). This means
that shareholders look for relief from auditors in case they fail to obey the terms and conditions
on engagement letter.
Auditing and litatiation
Auditing companies face different types of liabilities; some of these liabilities are civil and
criminal offenses. Criminal liability occurs to auditors when they have potentially breached the
imposed law by the government, and this means that criminal acts offer a relationship between
the state and the auditing entities (Richardson & Eberlein 2011). The civil laws in auditing deal
with differences or misunderstandings between organizations and individuals (Marianne 2019).