Liabilities of auditors?

What are the liabilities of auditors?

The below Civil liabilities of an auditor are briefly explained under the following topics:-

  1. Liability for Negligence.
  2. Liability under Companies Act.
  3. Liability under Consumer Protection Act.
  4. Liability for Unaudited Statements.
  5. Liability for Negligence of Assistants.

best auditors in bangalore

1. Liability for negligence

An auditor is expected to take reasonable care and skill to carry out his duties. Of course, nobody can fulfil their duties, use the key skill and display extraordinary knowledge.

When performing his / her duties, an auditor will negatively affect the following individuals:

With his party, he has a deal with the contract.
For third parties, the Auditor may know whether or not the auditor is dependent on the skill and skill of the third parties.
However, in the case of fraud, the auditor is liable for all individuals.

What are the consequences of negligence?

1. Compensation

The auditor should pay the damaged indebtedness due to negligence from the side of the auditor.
Clearance returns are not called unless the client loses any remote or indirect.
Special disadvantages

If the auditor is responsible when entering a contract and having knowledge of the existing conditions, he may claim specific damage due to his negligence.

2. Company liability

According to Section 477, the court can verify the auditor (or any employee of the company) and ask to make a book or record of the company kept in custody. This power can be performed only after the liquidator is appointed or after the release of the company.

If a company is upheld by the court order, if the fraud is done and the official liquidator suggests that a report has been made, the auditor (or any employee of the company) may be checked by the public. In a specified day.


The misunderstanding is that there is no strict or negligent in the functioning of the duties.

Loss of misconduct only rises only if you fail due to negligence or obligation. If you do not lose the misunderstanding, then you will not be liable. Steps can be initiated within 5 years –

From the date of the wise men.
Liquidator’s first appointment
The cause of the action to take action, whatever happens.
The process for misunderstandings will be initiated only if dissolving the company. Compensation for compensation including an auditor from all officers of the company.

The misunderstanding of the prospectus

A prospectus is an invitation to share a company’s shares or debentures.

An auditor has taken responsibility if he made a wrong statement as an expert and relies on a statement made by an individual and subscribe to any shares or debentures and resulting in loss or damage to the auditor.

However, an auditor is not responsible

A public notice has been issued that without the consent of having provisional approval and proven proof, without such knowledge or consent,
What if his consent is withdrawn prior to the rejection of the prospectus for registration?
After distributing the prospectus to registration, he was aware of the obscene statement before allowing the shares to be issued and the reason for his withdrawal and the reasons for withdrawal and a fair public notice
If there are reasonable grounds to believe that this statement was true, believe that the shares or debentures are correct until the date of allotment.

3. Liability as per Consumer Protection Act

Remember the following:

The auditor gives his opinion or advice to pay the fees. So they will be covered by the Consumer Protection Act.
If any chartered accountant provides comment or advice against any legal opinion or any opinion which does not support any judicial decisions, he may be called upon to pay compensation for damages due to his opinion or advice.

4. Liability for undefined statements

A Chartered Accountant may accept appointments other than his audit work. For example, a chartered accountant may write books and create financial statements for a client. He may not actually have audited client accounts.

However, after his own self-reliance on preparing financial statements, he will have all the possibilities of a third party to assume that he is the owner of a company and that he has made financial statements
Account books are correctly audited


In such a case, a Chartered Accountant shall be liable. However, when a chartered account enters the contract/agreement with a client, it is important to avoid such misunderstandings. Actually, there is no need to check the account books, or such facts must be specified in the appointment letter if there is no need for a complete audit.

Precautions to perform an auditor for unattractive statements

When submitting an audit report on certain matters, the limited range of interventions will be limited, and the following precautions should be taken when reporting to avoid liability.

The purpose and purpose of the report’s report should be clarified.
Very good terms like the review, public review, or verification should not be used to explain his involvement.
Do not use an Auditor Audit or Audit Fee in letters to the company or any other document.
This report should make it clear that the books should be easy.

5. There is an obligation to neglect the assistants

An auditor has the right to depend on the work performed by the assistants. However, it should be assured that the Assistant Managers are not acting negligently. Check with the test and the skills. Nevertheless, he will continue to shape and open up his opinion on financial information.

[frontpage_news widget=”879″ name=”Certicom – A Group of Chartered Accountants – Articles”]