ACCA AAA ^INT Syllabus B. Professional and Ethical Considerations - When are Auditors Liable to 3rd Parties? - Notes ^{2 / 3}

This involves looking at:

1. Foreseeability of damage to the 3rd party

2. A relationship of "proximity" with the 3rd party

3. It's fair, just and reasonable to impose such a duty on the accountants

Another way of looking at this is..

1. The auditor acted negligently

2. The auditor ought to have known that 3rd parties relied upon her opinion

3. The 3rd party suffered financial loss as a result

CONSEQUENCES

• A shareholder stands no different from any other investing member of the public to whom the auditor owes no duty

• Shareholders are seen as a class, the auditor reports to the class and not to assist individuals