The Key Difficulty for Third Parties in Legal Action Against

question 16

Essay

The key difficulty for third parties in legal action against auditors has been establishing that a duty of care was owed to them by their auditor.Explain the development of the relevant legal principles relating to an auditor's duty of care to third parties with reference to specific case law.

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Definitions:

Journal Entry

A journal entry is a record of a financial transaction in the accounting records, showing the accounts and amounts to be debited and credited.

Discount on Bonds Payable

The difference between the face value of a bond and the price for which it sells when the bond's market value is lower than its face value.

Installment Note

A debt instrument that requires regular payments, or installments, of principal and interest over a set period, until the debt is fully repaid.

Journal Entry

A record in accounting that shows a business transaction and its effect on the accounts, typically involving a debit and credit.