C. Accountants’ and auditors’ negligence
Professional negligence by accountants and auditors is judged by the ordinary professional standard of care. An accountant may be liable for failing to use reasonable care when giving professional advice or carrying out audit work, and a failure to comply with accounting standards is likely to be strong evidence of negligence. Liability may also arise where a conflict of interest affects the proper discharge of professional duties.
The scope of liability is generally limited by the retainer. For example, an accountant engaged to prepare tax returns is not usually liable for failing to detect a separate fraud outside the scope of that engagement.
In the case of auditors, their basic duty is to provide accurate information to shareholders as a body so that they can exercise their rights, and they are not generally treated as business advisers responsible for protecting the company from trading losses.
Depending on the circumstances, the duty may be owed to the client and, in some cases, to another person whom the accountant or auditor knew, or ought reasonably to have understood, would rely on the work.
