Auditors can be held liable under two classes of law when sued by clients, investors, creditors...

Auditors can be held liable under two classes of law when sued by clients, investors, creditors , or the government. Identify and briefly explain both classes of law.

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Expert Solution

Auditors can be held liable under two broad categories of law:

- Common Law :- Case law developed over time by judges who issue legal opinions when deciding a case (the legal principles announced in these cases become precedent for judges deciding similar cases in the future).
• Under Common Law - Auditors can be held civilly, but not criminally, liable.
• The auditor's liability to third parties (e.g., investors and creditors) under common law is complicated by the fact that legal precedent differs by jurisdiction (i.e., state by state).
• Auditors can be held liable to third parties for negligence, gross negligence, and fraud.
• Common law - liability to clients.
• Common law - liability to third parties.

- Statutory Law:- - Written law enacted by the legislative branch of federal and state governments.
• An auditor can be held civilly ($) or criminally liable (Jail).
• Federal statutory law - civil liability (clients & third parties).
• Federal statutory law - criminal liability (government).

keosha answered 11 months ago

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