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Chapter 4--Overview of Auditor’s Legal Liability Liability ...

Chapter 4--Overview of Auditor s Legal Liability Liability to Clients-Common Law An auditor is in a contractual relationship with a client. If the auditor does not perform his or her side of the bargain according to contract terms the client can sue for breach of contract. A client may seek these remedies for breach of contract: (1) specific performance; (2) general monetary damages for losses incurred as a result of the breach; and (3) consequential damages that occur indirectly as a result of the breach. An accountant may also be sued by a client under tort law.

Chapter 4--Overview of Auditor’s Legal Liability ... Any non-audit services are quite likely to result in a finding of a fiduciary relationship. ... a financial services firm, provided equipment financing to L.B. Smith, Inc. for many years. In 1978, Credit Alliance Corp.

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