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+--- Thread: auditors liability (/thread-auditors-liability--1531)
auditors liability - fauzi - 01-07-2005
how to reduce auditors liability, is there any recomendation on reducing auditor liability
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- smraza - 01-08-2005
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how to reduce auditors liability, is there any recomendation on reducing auditor liability
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Dear Fauzi,
In my opinion, auditors must carry out all the audit procedures deemed necessary striclty in accordance with the auditing standards. This is the only way which can reduce the auditor's liability.
SMR
- Azeem Shah Khan - 01-08-2005
dont audit<img src=icon_smile.gif border=0 align=middle>
well on a serious note auditors are covered with PII (Professinal Indemnity Insurance)and they are paid handsome amount of fees for their services. if they fail to do their job diligently then they should be held liable for that. it is a separate issue that what comes under DILIGENCE and AUDITORS' responsibilty....
cheeeeeeeers
azeeeeeeeeeem
"You don't get to choose how you're going to die. Or when. You can only decide how you're going to live. Now."
- Pracs - 01-09-2005
All the Big 4 and other large national practices have in the last couple of years geared up on various programs to minimise an auditor's liability in any litigations. However, post Enron, it has becoming more of a daunting task. Having said that I think the following controls and procedures are effective
-maintaining a clear and complete set of audit work papers
-gathering audit evidence that is smart and that would be recognised/accepted in a court of law.
-developing and implementing internal firm controls that ensure audit plans and audit programs cover most audit issues.
-encouraging 'whistle blowers' within the audit firm across board. So that an assitant may also add value to the risk process.
-develop and implement risk assessments that are tailor suited for various industries and legal jurisdictions.
-Categorise certain industries 'normal than high risk' as an idustry requirement, for instance Banks, financial institutions, publicly traded companies.
-Develop regional offices/partners that specialise in risk assessment and are responsible for 'signing off' on risk clients.
These are some of the steps that 'the audit profession' at large could follow to minimise litigation and other legal implications.
As Azeem has pointed out - Professional indemnity/insurance is very much a mitigant resource, however, we have witnessed cases where the indemnity provider / insurer could only foot part of the bill. Moreover, professional indemnity does not cover you if you have been 'professionally negligent'. I guess tha age old idiom needs to be changed..
the auditor is a hunting dog that needs to point where the foxes are !
any comments guys/gals.
regards
"Allah does not change the state of people unless they change what is within themselves" Quran 1311
- Goodman - 01-09-2005
One can implement different controls to minimise auditors liablity, there is a long list of controls.
1. Get a copy of letter of engagement signed by the client so everybody knows what is expected out of the audit.
2. Personally, I have implmented "limitation of Auditors liablity clause" in the Engag. letter, which is a multiple of Audit fees. Any Good solictor can help you in that.
3. No partner and staff should say a word about audit client in public. I cant remember the legal case but its there.
4. Dont rely on the PI Cover. During my previous job we have had the experience dealing with PI claim and take my word, insurance company will make it the hardest thing possible on the face of the earth to get money out of them.
5. Sensitive audits must be cold reviewed or hot reviewed by independent professionals.
- Shahid_fss - 01-13-2005
There are details of auditor's liability and ways to reduce it on the site of ICABC (Institute of Chartered Accountants of British Columbia); site address is http//www.ica.bc.ca/kb.php3?artid=1512
Also check out this one http//www.treasury.gov.au/documents/403/HTML/docshell.asp?URL=Ch5.asp
ACCA site material on Director and Auditor Liability http//www.accaglobal.com/technical/responses/recent/1089554
Hope these will help u.
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