Extent of auditor liability
An auditor is liable in tort to the company if he is negligent in carrying out his duties as auditor, and potentially also to a third party who suffered damage or loss as a result of relying on the auditor's report. However, case law demonstrates that a substantial burden of proof is required in order to demonstrate liability in tort. In Caparo Industries plc v Dickman1 it was held that, in the absence of any contractual or other special relationship with an investor, potential investor or third party, an auditor does not owe a duty of care to individual shareholders or to the public in general who may rely on the audited accounts of the company. The auditor is liable only to the company and to the existing shareholders, as a body,