An auditor’s liability and its limits
An auditor’s liability and its limits

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • An auditor’s liability and its limits
  • Brexit impact
  • Liability of an auditor
  • Contractual liability
  • Liability in tort
  • Statutory liability
  • Limiting an auditor’s liability—statutory limit
  • Limiting an auditor’s liability—general prohibition and exceptions
  • Exception to general prohibition—permitted indemnity for the costs of successfully defending proceedings
  • Exception to general prohibition—permitted liability limitation agreement

There are statutory provisions relating to the liability of an auditor of a company and the limits that may be placed upon it. Prior to 6 April 2008, a company could not exempt or indemnify its auditors from liability for any negligence, default, breach of duty or breach of trust in relation to the company occurring in the course of the audit of accounts. However, such exemption or indemnification is now permitted, provided it takes the form of an indemnity for the costs of successfully defending proceedings or a liability limitation agreement.

In addition, there may be other rules relating to the liability of an auditor and its limits that apply to a listed company, an AIM company or a company with securities that are listed on the AQSE Main Market, AQSE Growth Market or AQSE Trading (formerly NEX Exchange Main Board, NEX Exchange Growth Market and NEX Exchange Secondary Market), but these are outside the scope of this Practice Note.

Some or all of these statutory provisions may also apply to other companies and entities, but this issue is also outside the scope of this Practice Note.

Brexit impact

The UK audit regime may be affected by Brexit. For further details of its impact, see Brexit—statutory audit.

Liability of an auditor

An auditor may be engaged to provide a variety of services to a company, but the discussion of

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