The auditors‘ liability may be grouped into two: –
(i) Liability under statute either civil or criminal liability
(ii) Liability arising from negligence under common law.
Liability for damages for material misstatements in published accounts, may arise from any of the following situations:
i. His failure to detect material error or fraud, that he would have been reasonably expected to detect.
ii. Carelessness and/or dishonesty on the part of the auditor
iii. Falsification of accounting records or documents
iv. Publishing a misleading statement intended to deceive members or creditors.
v. In any proceedings for negligence, breach of duty or breach of trust, the court may relieve the auditor from his liability if: –
vi. He acted reasonably and honestly
vii. Having regard to all circumstances of the case he ought fairly to be excused for the negligence or default.
viii. If he carried out his work in accordance with generally accepted auditing standards.