Auditors May Be Held Liable to Both Their Clients and Third

question 17

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 a client under common law?
b. What must a third party prove to recover losses from an auditor under common law?
c. How does an auditor's ethical obligations and liability under common law intersect?

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Definitions:

Marginal Product of Labor

The additional output produced as a result of employing one more unit of labor, holding other inputs constant.

Equilibrium Outcome

This term describes a state in a market or game where all participants' actions are balanced, and no incentive exists to deviate from the chosen strategy.

Monopoly Wage Rate

The wage setting behavior of a monopolist employer who might set wages below competitive levels due to lack of competition in the labor market.

Competitive Wage Rate

The equilibrium wage set in a market where the demand for labor meets the supply, with no individual employer able to influence the wage rate.