What Are The Auditor's Liabilities In Case Of Any Negligence On The Part Of The Auditor?


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An auditor to a limited company is an agent of the shareholder. He is required to exercise reasonable care and skill in the performance of the work entitled to him, and If he fails to do then the question of his liability with reference to the negligence arises. This matter is discussed in the light of legal provisions are as under:

Where an auditor is proved to be negligent but no loss is sustained by his client arising out of his negligence. He is not liable. These thought has the support of judicial pronouncement given in the case of Liverpool and wigon supply association limited.

An auditor cannot restrict his liability by entering into an agreement as his duties are define and laid down in the company's ordinance, 1984 and therefore any such agreement would be against the law and will be void. He will be liable for damages in spite of such an agreement.

An indemnity clause interested in the articles of company by which the directors, managing agents, auditor and other officers of the company are relieved from liability has been declared void section 194. However the court may relieve an auditor of liability for negligence or misfeasance if it is proved that he acted honesty and reasonably.

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