An Analysis of the Auditors' Liability to Third Parties in Australia

Abstract

The purpose of this research paper is to provide a comprehensive analysis of the scope of auditors' liability to third parties in Australia. In addition to examining the current legal position in Australia, the law on auditors' liability in other jurisdictions, including the United Kingdom, United States, Canada and New Zealand, will be examined and compared to the extent of their influence on Australian laws. It is argued that auditors in Australia are subject to a greater scope of liability than in other countries. As a result, there is a need for reform of audit laws in Australia to limit the extent of auditors' liability. Further, it is submitted that the development of future auditing laws in Australia should allow for the appropriate consideration of international trends in limiting liability. It is also anticipated that the proposed reforms will adequately safeguard auditors from the threat of litigation by third parties, and ultimately ensure that the floodgates for liability in Australia are not opened to an indeterminate level.