Auditors May Be Held Liable to Both Their Clients and Third

question 22

Essay

Auditors may be held liable to both their clients and third parties under common law.
a.What must a client prove to recover its losses from the auditors under common law?
b.In a court that adheres to the precedent set by the Ultramares v.Touche case,what must an ordinary third party prove to recover losses from the auditors under common law?

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Definitions:

Transactions

Acts of buying, selling, or exchanging goods, services, or financial assets in the course of business.

Assets

are resources with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide future benefit.

Liabilities

Financial obligations or debts that a company or individual owes, which are required to be paid in the future.

Beginning Equity

The value of an owner's interest in a company at the start of an accounting period, before any transactions affecting equity occur.