Highlight the possible defenses available to an auditor in a court of law who has been sued for failure to detect fraud in client‘s company

Defense available to an auditor in a court of law in case he has been sued for failure to
detect fraud in client‘s company.
– Breach of contract may occur when there is non-performance of a contractual duty. Causes for action against the auditor for breach of contract may include but are not limited to the following
• Violating client confidentiality
• Failing to provide audit report on time
• Failing to discover a material misstatement
– Remedies for breach of contract include requiring specific performance
• Specific performance of contract agreement.
• Providing for recovery of amounts lost as a result of breach. When specific performance or on injuction is not appropriate, the client is entitled to recover compensatory damages.

The auditor can use the following defenses against breach of contract
– The auditor proofs that the exercised dues professional care and skill in accordance with the contract.
– Contributory negligence was present i.e. both the client and the auditor were involved in negligence
– The client losses were not caused by the breach i.e. the client did not suffer financial
loss as a result of auditor‘s negligence.



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